Experts highlight the innovative potential of stablecoins and warn that Europe risks falling behind the United States

The Spanish Banking and Finance Institute (IEBF, for its acronym in Spanish) hosted “Stablecoins: stability or illusion?”, a new session of the Banking Lab with José Manuel Marqués, Director of the Financial Innovation and Infrastructures Department at Banco de España, Lorena Mullor, Digital & Banking Public Policy Advisor of the Spanish Banking Association, and Pedro J. Cuadros, professor of the Department of Economics at CUNEF Universidad and FUNCAS Economist. The session, held in the Auditorium of CUNEF Universidad, was chaired by Manuel Balmaseda, Director of the IEBF. The speakers agreed on the innovative potential of stablecoins, warning that Europe risks losing its leadership to the United States and stressing that this will depend on how consumers and companies use stablecoins and on how markets integrate them.

Based on the existing levels of competition and innovation, José Manuel Marqués expects to see “very different use cases, which will vary significantly from today’s”. In this sense, he pointed out that central bank money “has to keep providing stability and security by being interoperable with other means of payment, ensuring that the system stays safe and stable” in both wholesale and retail.

Lorena Mullor predicts that “we will see more stablecoins in the next five or ten years, and although we won’t adopt them massively for everyday use, they will be used internationally and globally in certain cases, in a larger market”. For his part, Pedro J. Cuadros anticipates three potential use cases: “There may be payments, especially remittances, international transactions and cross-border payments; inflation protection situations in countries like Argentina and Turkey; and uses in cryptocurrency environments, since 70-80% of stablecoin transactions are linked to them.”

The experts also discussed the geopolitical environment and the United States’ strategy to use stablecoins to strengthen the US dollar. “In our opinion, the danger doesn’t lie in the regular use of stablecoins by Europeans, but rather in the risk that Europe will fall behind in innovation and in the creation of new programmable digital money, reducing its relevance and control in emerging digital ecosystems,” Ms Mullor remarked. To mitigate this risk, she calls for “combining good regulation with innovation and the creation of proprietary digital payment infrastructures and instruments in euros, including regulated stablecoins, deposit tokens and wholesale CBDC (Central Bank Digital Currency), strengthening the euro in the new digital environment”. In this regard, she pointed out that banks play a key role in “facing this challenge”.

Regarding stablecoin regulatory frameworks in the United States and Europe, “there are differences, but the essence is the same in terms of regulations and security”, according to Mr Marqués. The main difference is that the United States “wants to use stablecoins to promote the use of US dollars in other countries, while Europe is more focused on respecting monetary sovereignty in each country by promoting interoperability to make cross-border transactions more efficient”. Pedro J. Cuadros pointed out that “the United States is the only country opposed to issuing a public digital currency”.

Finally, Professor Cuadros stressed that stablecoins “are stable until they aren’t” and, in this regard, he warned that “they are an asset with conditional stability”, recalling that when Silicon Valley Bank collapsed, USD Coin temporarily dropped from its $1 peg to $0.87. “Stablecoin stability depends on reserves being liquid and secure, as well as on transparency, trust, and good design.”

Since its creation in 2018, the Banking Lab has become a benchmark as a space for reflection on relevant banking sector issues.