US digital asset strategy and the European response

This paper analyzes the potential effects of the US administration's Digital Assets Strategy (DAS), which promotes the development and use of dollar-backed stablecoins while prohibiting a US Central Bank Digital Currency (CBDC). The authors argue that a consistently pursued DAS could weaken the Federal Reserve's monetary control and payments oversight, potentially harming the dollar's international role and introducing financial instability risks. Although Europe's monetary sovereignty is largely unaffected, the paper suggests strengthening the EU's MiCA regulation and the euro's legal tender status to mitigate risks like dollarization. Furthermore, it concludes that while a wholesale CBDC would benefit cross-border payments, the currently planned retail digital euro would not significantly protect Europe's monetary sovereignty.