Money 20/20 Europe is the epicentre of the European Fintech scene in June. That is where the connections are made, where the deals are signed (or frustration builds if they are not).

Money 20/20 Europe is where +7.000 industry professionals gather to think about the future and discuss the pain points and opportunities that technology brings. Unfortunately, too often, the formal talks seem to be written up front to avoid any controversies on stage. That is not how I got to know Money 20/20, now more than 10 years ago, but luckily, there are exceptions.

One of those was hidden in an exceptional room (the MoneyLab), for a limited number of people. It was moderated by my friend Samantha Emery, in a conversation with Laurent Marochini, CEO Luxembourg, Standard Chartered, Tony McLaughlin, CEO of Ubyx Inc, and Simon Seiter, Managing Director and CFO/CPO, AllUnity.

The session was titled “Understanding the Geopolitical Impact of Stablecoins”. I liked this session so much because it wasn’t about much customer experience, nor about agentic AI revenue opportunities, or about how programmable money will change the world. It wasn’t about any of that.

No, the core theme of this dialogue was the things that should be discussed but are too often avoided. It built nicely on a session at The Banking Scene Conference Brussels, by Tim Hermans, Director at the National Bank of Belgium. It touched on the power of money and maybe also on what some are looking for to solve a problem with a solution like stablecoins.

Dollarisation of digital money

At The Banking Scene, we’ve discussed “Sovereignty in Europe” for 4 years now. The importance isn’t new, but the approach changes every year. What started as a call for an alternative to the American Card schemes and a European CBDC remains highly relevant. Over the years, and definitely over the past year, Europe’s dependence on big tech and global American fintech firms has been added to the equation.

Today, we need to add an extra topic to the discussion: stablecoins.

Tim Hermans spoke about “Stablecoins and Tokenisation: a European perspective”, in which he stated that “last year alone, transaction volumes exceeded $60 trillion while market capitalisation has increased sixfold over the past five years”. Tim explained that these stablecoins are mostly dollar-denominated.

In the panel at Money 20/20, Simon Seiter made this uncomfortably more explicit: today’s European stablecoin market is 99% USD-denominated coins issued by US entities. The importance of this lies not just in the dependence on stablecoin issuers, but even more in the fact that these stablecoins worldwide are funding US debt, explained Tony. If you, as a consumer, buy and hold stablecoins from these US issuers, they buy collateral to back these stablecoins, and that collateral is US debt.

The panel made the comparison with the Petrodollar, a concept from 1974, when Saudi Arabia agreed with the US to price and sell all oil exports exclusively in US dollars, in exchange for military protection, weapons, and technical cooperation. The result was that every country that needed oil needed to hold US dollars, and oil exporters held enormous amounts of dollars, which, for an interest, we used to buy US debt.

How Stablecoins Change the Power Play

Money is power, and stablecoins may become the latest mechanism through which the United States extends the influence it has built over decades. Stablecoins are a new form of financial leverage that strengthens the US’s global power and political influence.

A growing influence of dollars also implies a less effective European monetary policy, which affects us all. The more economic activity migrates towards dollar-denominated instruments, the harder it becomes for European policymakers to steer economic outcomes through monetary policy alone.

“At present, stablecoins serve mainly as an internal settlement and liquidity bridge within the crypto ecosystem, but their potential use is obviously much broader than that”, explained Tim at The Banking Scene Conference Brussels. “Over time, their function could expand and potentially overlap with more traditional roles, such as supporting real economy payments, and like many other innovations, their ultimate use cases are still evolving.”

If that happens, market capitalisation will grow further, and so will stablecoins’ dependence on US debt. This should be the main reason for Europe to accelerate the development of euro-denominated stablecoins and, according to the panellists, also a reason to review Europe’s regulatory approach to facilitate more innovation.

At our conferences, MiCAR was often highlighted as an opportunity to provide greater regulatory clarity for organisations looking to jump on the crypto and stablecoin train. MiCAR provides a protective regulatory environment with a strong emphasis on capital buffers, reserve composition and the prohibition of yield generation by issuers of crypto asset service providers.

“The United States”, explained Tim Hermans on May 28, “has taken a different approach with the adoption of the Genius Act. This more permissive framework reflects a broader ambition to position the US as a global hub for digital finance, and compared with MiCAR. It allows for a wider range of eligible reserve assets, permits redemption fees, and is more accommodating on yields, and this divergence inevitably creates scope for regulatory arbitrage, particularly under cross-border multi-issuance models, and while some nuances may arise through implementing measures”.

Tim summarised that stablecoins have become a strategic geopolitical tool under "Trump economics 2.0," where the US utilises dollar-denominated stablecoins to protect the global dominance of the greenback, partially bypass traditional banking, and boost demand for US government debt. This American strategy poses a direct threat to Europe's monetary sovereignty, thereby forcing European policymakers to pursue strategic autonomy through the development of their own digital asset frameworks and blockchain infrastructures.

Aside from the geopolitical risk of Europe making itself less relevant, there is also the risk of “bank runs” and fire sales. A recent speech from Isabel Schneiber, Members of the Executive Board of the ECB explained “If households and firms replace bank deposits with stablecoins, banks are likely to face a less stable deposit base as retail deposits are replaced by wholesale deposits. This shift would make banks’ liabilities more concentrated, rate-sensitive and volatile.

The second fragility concerns the risk that money market funds, or stablecoins for that matter, may themselves face runs. Knowing that, according to that same speech, 90% of the total stablecoin market is held by the 2 largest US dollar-denominated stablecoins (Tether and USD Coin), you see how high the concentration risk is, and what the impact would be if trust in one of those two were to erode, leading to a run.

What Should Europe Do in This Changed World Order?

As Tony explained a few days later at Money 20/20: “The game is about national interest. Unfortunately, because we’re in Europe and the UK, we're still under the impression we're living in a rule-based international order when we're really back to the 19th century of power.”

With initiatives like Qivalis, we see Euro-denominated stablecoins emerging, and Tim explained that MiCAR is already under review, with further adjustments under consideration on multi-issuance models (where a single global stablecoin issuer distributes its token across multiple countries and jurisdictions) and reserve requirements.

The key question is whether initiatives like Qivalis will be a sufficient answer to the retail stablecoin market, where demand today comes from crypto exchanges and remittance businesses. Qivalis is backed by banks, which enhances trust, but also prudence and safety. This is relevant to Qvalis's main use cases around cross-border payments, corporate treasury and liquidity, atomic settlement, and tokenised assets between banks, but it is also the opposite of the global American stablecoin issuers like Tether and Circle.

That also creates an interesting dilemma for banks. They are expected to help build Europe’s response to the rise of stablecoins, yet widespread adoption of stablecoins could ultimately reduce the importance of traditional bank deposits and payment rails. The industry may find itself in the unusual position of having to accelerate a transformation that could fundamentally reshape its own role.

And maybe the answer doesn’t even lie in another stablecoin, but in other initiatives to grow demand for the euro in a digital world. Could CBDCs fill the gap, maybe?

Honestly, I don’t have the answer, and I am curious to see how things will develop in the stablecoins space, both from an adoption AND from a geopolitical lens. Because that is what this blog is essentially about: if payments are becoming a geopolitical battleground, then what are the rules of the game?

Rik and Andrew recap the highlights of the last 2 hectic weeks: from our flagship conference in Brussels, to hosting 2 Think Tank dinners in Amsterdam and attending Money20/20 where the above session took place. As a special treat to our viewers and listeners who may have missed it, we end this episode with our Banking Poetry music video that was a huge hit in Brussels! You can also find us on your favourite podcast platform here.