Blockchain is transforming finance via stablecoins and asset tokenisation, presenting an opportunity for Europe to supercharge retail and investment banking innovation
he world is on the verge of a financial revolution. Stablecoins, which are backed by traditional assets and run on digital rails, are moving from the fringes of crypto to the core of global finance. They promise faster payments, cheaper transactions and new forms of money.
Yet to lead the financial revolution, Europe must overcome a series of challenges. The first is to harmonise political will. While the EU has established very clear regulations on cryptocurrency under the Markets in Crypto-Assets Regulation (MiCA), some member states still treat stablecoins as securities, creating a complex legal landscape.
We are already using smart contracts to streamline and automate financing processes, where stablecoins are an essential part of the money flow
Francisco Maroto, Head of Blockchain and Digital Assets, BBVA
Calls for harmonisation are growing. In September, the French, Italian and Austrian markets authorities released a proposal for major stablecoin issuers to be overseen by a single body, pointing out “major differences in how crypto markets are being supervised by national authorities”.
The comparative leaps taken by the United States have made this a priority. By setting clear rules for dollar-backed tokens, America’s GENIUS Act could help embed the greenback in cross-border payments and capital flows before euro-based alternatives can take hold. “Europe should not stay idle,” says Mung Ki Woo, Chief Operating Officer, Group Financial Services at Sopra Steria, the European consulting, digital services and solutions company. “The stablecoin market is likely to grow in the next few years and, if the current market structure remains unchanged, we will have a global dollar dominance in this new finance.”
New money
Much of the demand for action on stablecoins is being driven by crypto players. Some 90 per cent of the traditional banking and fintech executives surveyed by Fireblocks were using or exploring stablecoin, with nearly half using them for payments.
The question is: who is going to shape this new financial world? The US has been quick off the mark, passing laws such as the GENIUS Act, which provides a clear legal framework while promoting stablecoins as a way to strengthen the dominance of the dollar around the world. Europe is still hesitant: historically, crypto assets have been very volatile – and policymakers have been quick to raise concerns.
If a large part of the monetary supply becomes dollar-backed stablecoins, how would central banks regulate economic conditions using interest rates?
Professor Richard Portes, President, Centre for Economic Policy Research
“One clear concern is that a run on stablecoins could destabilise the wider financial system, as we saw with Silicon Valley Bank in 2023,” says Professor Richard Portes, President of the Centre for Economic Policy Research. “Another concern is that if a large part of the monetary supply becomes dollar-backed stablecoins, how would central banks regulate economic conditions using interest rates?”
Europe’s stablecoin state of play
Fortunately, Europe is well equipped to bridge the transatlantic gap. The European Central Bank (ECB) already has strong oversight of digital assets under the Markets in Crypto-Assets Regulation (MiCA). This allows it to ensure service providers have sufficient currency reserves, while also maintaining centralised oversight. This can secure stablecoins as a stable and controllable source of value.
The ECB has also launched a pilot regime to accelerate asset tokenisation. “We are already using smart contracts to streamline and automate financing processes, where stablecoins are an essential part of the money flow,” explains Francisco Maroto, Head of Blockchain and Digital Assets at BBVA, the Spanish financial services giant. “Meanwhile, we are working on our own stablecoin, a euro-denominated e-money token issued under MiCA regulation.”
Once released, BBVA’s coin will compete with other euro-denominated stablecoins already in circulation across Europe’s growing market. Yet the continent still has a lot of ground to make up. More than 99 per cent of the global stablecoin market is still USD-denominated, and the GENIUS Act now provides the framework to grow further. Europe can still catch up, says Sopra Steria’s Woo. “Some studies estimate that Europeans own approximately 25 per cent of the world’s crypto assets, so the same market share for euro-denominated stablecoins would not be far-fetched.”
Seizing Europe’s opportunity
If they are to lead Europe into the tokenised world, policymakers must speed up adoption of asset tokenisation. “This means directing savings towards asset tokenisation,” explains Woo, who points out that whoever builds the first deep, liquid market will be able to define the rules of trading in much the same way as the US has shaped smartphone and social media markets.
Europe is well placed to build this scale fast. The EU has 33.5tn euros in savings but 34 per cent of these are held as deposits or currency versus 14 per cent in the US. Redirecting this capital to tokenisation would propel the bloc to the forefront of digital innovation and allow European institutions to set the infrastructure, standards and governance of tokenised finance rather than importing them from abroad.
Estimates suggest that Europeans own 25 per cent of the world’s crypto assets, so the same market share for euro-denominated stablecoins would not be far-fetched
Mung Ki Woo, COO, Group Financial Services, Sopra Steria
It would also create a new channel for household savings to be put to productive use, deepening capital markets and reducing dependence on US-led platforms. “In practice, Europe should include asset tokenisation in the definition of the future Savings and Investment Union (SIU),” says Woo. “We would thus kill two birds with one stone: Europe would become a global leader in the future of finance while at the same time boosting its economies.”
With this in place, they should then accelerate the issuance of euro-denominated stablecoins. This will strengthen two key areas of the European economy, explains BBVA’s Maroto. “The first is interbank settlement, where stablecoins can significantly streamline transactions by reducing reliance on intermediaries, lowering costs, and enabling real-time processing; the second is cross-border payments, where stablecoins have the potential to make international transfers faster and more transparents.” For Europe, with its highly interconnected economies and global trade links, this is a major opportunity to enhance competitiveness and financial integration.
The choice now is whether Europe treats stablecoins and tokenisation as a threat to manage or as a platform to shape. The technology is already in use – from Santa Cruz to Paris – solving problems that traditional finance cannot. If Europe mobilises its savings and regulatory weight, it can set the standards for a safer, more efficient digital financial system. If it hesitates, those standards will be written elsewhere and European capital will once again be deployed on platforms built abroad.