Trump's crypto strategy may threaten Europe's financial stability

Concerns are mounting within the European Union regarding the potential impact of U.S. President Donald Trump's pro-cryptocurrency policies on Europe’s financial stability and monetary sovereignty.

Pierre Gramegna, managing director of the European Stability Mechanism (ESM), expressed these worries during a Eurogroup press conference on March 10.

He highlighted that the U.S. administration's favorable stance towards cryptocurrencies, particularly dollar-denominated stablecoins, could lead to significant challenges for Europe.

"If this were to be successful, it could affect the euro area’s monetary sovereignty and financial stability," Gramegna warned.  

He emphasised that a surge in U.S. tech firms launching mass payment solutions based on these stablecoins could undermine the euro's position in global finance.

The ESM supports the European Central Bank's (ECB) efforts to expedite the development of a digital euro, which Gramegna described as "more necessary than ever" to safeguard Europe's strategic autonomy.

The ECB has been exploring the concept of a digital euro since 2020, aiming to provide a competitive alternative to U.S.-dominated payment systems.

Irish finance minister Paschal Donohoe echoed these sentiments, stating that developments in other jurisdictions could have significant ramifications for Europe.

He noted that discussions surrounding cryptocurrencies are intrinsically linked to the EU's monetary independence and currency resilience.

Trump's administration has taken decisive steps toward integrating cryptocurrencies into the U.S. financial framework, including signing an executive order aimed at establishing a strategic reserve of digital assets.

This marks a stark shift from previous administrations that approached cryptocurrencies with scepticism.

The ECB has maintained a cautious stance regarding cryptocurrencies, explicitly rejecting proposals to include Bitcoin in its reserves due to concerns over liquidity and security.

ECB President Christine Lagarde has reiterated that central bank reserves must be "liquid, secure, and safe."