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Digital Money and Monetary Power: Europe’s Strategic Choice in a New Financial Order

As of June 2026

The global financial order is undergoing a quiet but profound structural shift.

At first glance, it may look like a familiar contest between the U.S. dollar and China’s renminbi. But the real issue is broader. The next financial order may not be determined only by which currency is used more often. It may be shaped by who controls digital payment rails, stablecoins, central bank digital currencies, tokenised assets, wholesale settlement infrastructure, and the standards that govern financial data.

A stablecoin is a digital token designed to maintain a stable value, usually by being pegged to a fiat currency. A central bank digital currency, or CBDC, is a digital form of public money issued or backed by a central bank. CBDCs can be divided into retail CBDCs, designed for households and businesses, and wholesale CBDCs, designed for banks, financial institutions, and market infrastructures. Tokenisation refers to the process of turning real-world or financial assets — such as government bonds, bank deposits, corporate debt, real estate, or trade finance instruments — into blockchain-based digital assets.

The key question is no longer simply where money is issued. It is where money moves, which assets it settles, and which networks define the rules.

The United States has moved to bring dollar-backed stablecoins into the regulated financial system through the GENIUS Act. The White House has described the law as a way to increase demand for U.S. Treasuries and strengthen the dollar’s global reserve currency status by requiring stablecoin issuers to back their tokens with dollars and U.S. government debt. (The White House)

China is pursuing a different strategy. Through the digital yuan, CIPS, mBridge, and Belt and Road-linked financial networks, Beijing is building a parallel payments infrastructure that could operate outside the dollar-centred system when necessary. This is not best understood as an immediate attempt to replace the dollar. It is better seen as an effort to create an alternative financial network for China-centred trade and investment.

Europe now faces a strategic choice.

Will it use the digital euro mainly as a defensive tool to protect monetary sovereignty? Or will it build a broader euro-based digital financial ecosystem that includes the digital euro, euro stablecoins, tokenised bank deposits, wholesale central bank money, and tokenised capital markets?

That may become one of the most important questions in European financial policy.

The dollar is not collapsing — it is being digitised

The data does not support the idea that the dollar is collapsing.

According to the IMF’s COFER data, the U.S. dollar accounted for 56.77% of global foreign exchange reserves in the fourth quarter of 2025. The euro accounted for 20.25%, while the Chinese renminbi accounted for only 1.95%. The dollar’s share has declined over the long term, but it remains the dominant reserve currency. (data.imf.org)

The dollar is even more dominant in foreign exchange markets. According to the BIS 2025 Triennial Survey, global over-the-counter foreign exchange turnover reached $9.6 trillion per day in April 2025, and the dollar was on one side of 89.2% of all trades. The euro was involved in 28.9% of trades. (bis.org)

This means that describing today’s world as a collapse of dollar dominance is misleading. A better description is the digital reconfiguration of a dollar-centred order.

The issue is not that the dollar is weak. The issue is that the United States is maintaining dollar dominance under higher fiscal and geopolitical costs. The Congressional Budget Office projects that the U.S. federal deficit will rise from $1.9 trillion in fiscal year 2026 to $3.1 trillion by 2036, with rising net interest costs driving much of the increase. (Congressional Budget Office)

In that context, dollar stablecoins could become a new strategic instrument. If dollar-backed stablecoins become the default settlement asset for digital payments and tokenised finance, the dollar could extend its dominance from the traditional banking system into blockchain-based financial infrastructure.

The U.S. strategy is therefore not only about supporting the crypto industry. It is about ensuring that the dollar remains the default language of global finance in the digital age.

China is building a parallel system, not replacing the dollar tomorrow

China is not in a position to replace the dollar overnight.

The renminbi remains a small player in global payments compared with the dollar and the euro. But China’s strategy is not simply to raise the renminbi’s payment share by a few percentage points. Its deeper goal is to build a parallel financial infrastructure that allows China and its trading partners to transact without relying entirely on the dollar-centred system.

CIPS should be understood in this context. It is not a complete replacement for SWIFT. SWIFT is a global financial messaging network; it does not move money itself. CIPS is a renminbi clearing and settlement infrastructure that helps China reduce its dependence on Western payment rails in cross-border yuan transactions. CSIS has noted that CIPS remains much smaller than Western infrastructures and has historically relied on SWIFT for many transactions, but it still matters as a building block for a parallel financial universe. (CSIS)

China is now linking this infrastructure with the digital yuan. In June 2026, China’s digital yuan operation centre signed direct participant agreements with 26 financial institutions in Shanghai, aiming to expand low-cost, efficient cross-border payments and advance the global use of the Chinese currency. (Reuters)

mBridge is another important experiment. According to Reuters, the China-led cross-border digital currency platform had processed more than 4,000 transactions worth around $55.5 billion by January 2026, with the e-CNY accounting for roughly 95% of the volume. The platform involves China, Hong Kong, Thailand, the United Arab Emirates, and Saudi Arabia, and the BIS exited the project in 2024. (Reuters)

China’s goal, then, is not to replace the dollar tomorrow. It is to create a usable option for a China-centred economic sphere to transact without the dollar when needed.

That is not the end of dollar dominance. It is the emergence of parallel financial infrastructure alongside it.

Why the United States is focused on stablecoins

The U.S. focus on stablecoins is not just about crypto innovation.

Stablecoins could become core settlement instruments for 24/7 payments, cross-border transfers, programmable contracts, and blockchain-based asset markets. If tokenised government bonds, equities, funds, real estate, and trade finance grow, the currency used to settle those transactions will matter greatly.

At present, the global stablecoin market is overwhelmingly dollar-based. Reuters reported in May 2026 that euro-denominated stablecoins accounted for only 0.3% of a global stablecoin market worth around $300 billion. (Reuters)

ECB Executive Board member Isabel Schnabel has also warned that stablecoin growth could reinforce dollar dominance through network effects, scale, and first-mover advantages, potentially limiting the euro’s future role in tokenised finance and the international monetary system. (Reuters)

This is the strategic logic behind the U.S. approach.

Historically, dollar dominance rested on banking networks, commodity pricing, trade finance, U.S. Treasury markets, and dollar-based international payments. In the future, dollar stablecoins and tokenised finance may be added to that architecture.

If the dollar becomes the default settlement unit of blockchain-based finance, the United States will have secured a powerful first-mover advantage in the digital financial order.

Europe’s problem: regulation is not the same as platform power

Europe has one of the world’s most advanced regulatory frameworks for digital finance.

The clearest example is MiCA, the Markets in Crypto-Assets Regulation. MiCA brings crypto-assets and stablecoins into a formal regulatory framework. It requires e-money token issuers to be authorised as credit institutions or electronic money institutions, and it requires crypto-asset service providers operating in the Union to be authorised. (eur-lex.europa.eu)

MiCA also prohibits issuers of e-money tokens and related crypto-asset service providers from granting interest to token holders. This makes a simple “interest-bearing euro stablecoin” an unlikely central model for Europe. (eur-lex.europa.eu)

But regulation and platforms are not the same thing. Europe may lead in rulemaking while falling behind in infrastructure.

The digital euro is Europe’s most visible response. The ECB sees it as a way to strengthen European payment sovereignty and strategic autonomy. As of June 2026, however, the digital euro has not yet been launched. The ECB plans a 12-month pilot starting in the second half of 2027 and aims to be ready for a potential first issuance in 2029, assuming EU legislation is adopted in 2026. (European Central Bank)

The project recently cleared an important political hurdle after a key European Parliament committee backed draft rules for the digital euro. Reuters reported that the digital euro would not earn interest, would be subject to holding limits to avoid destabilising bank deposits, and is aimed partly at reducing Europe’s dependence on U.S.-dominated payment networks such as Visa and Mastercard. (Reuters)

This creates Europe’s dilemma.

The digital euro is important for internal payment sovereignty. But if the global rails for digital payments and tokenised assets are built first around dollar stablecoins, the digital euro may remain largely a regional public payment tool.

Europe’s question is therefore not simply whether to launch a digital euro. The bigger question is whether Europe can build an entire euro-based digital financial ecosystem around it.

MiCA as Europe’s shield — but not its strategy

If the United States is using dollar stablecoins to shape the next layer of global finance, MiCA is Europe’s first line of defence.

MiCA does not allow any stablecoin to expand freely across the European market without meeting regulatory requirements. For e-money tokens, the issuer must be an authorised credit institution or electronic money institution. For crypto-asset services, the provider must also be authorised in the EU. (eur-lex.europa.eu)

The most important point concerns stablecoins denominated in currencies that are not official currencies of an EU member state, such as the U.S. dollar. Under MiCA, if an asset-referenced token is widely used as a means of exchange within a single currency area and exceeds a quarterly average of 1 million transactions and €200 million per day, the issuer must stop issuing that token and submit a plan to bring usage below those thresholds. Article 58 extends these rules to e-money tokens denominated in a non-EU currency. (eur-lex.europa.eu)

This is not a blanket ban on dollar stablecoins. But it is a powerful constraint on their use as large-scale payment instruments inside Europe.

In practice, MiCA can act as a protective wall. Dollar stablecoins may continue to dominate global crypto liquidity, but their expansion into European everyday payments and business settlement faces licensing, reserve, reporting, interest, and usage restrictions.

However, this shield does not guarantee victory.

MiCA can buy Europe time. It cannot build the market by itself. If Europe does not use that time to develop its own euro stablecoins, tokenised deposits, wholesale settlement infrastructure, and tokenised capital markets, global on-chain finance could still consolidate around dollar rails outside Europe.

Europe’s core challenge is not simply to block dollar stablecoins. It is to use the regulatory space created by MiCA to build a competitive euro-based digital financial ecosystem.

Should Europe promote euro stablecoins?

The answer is not simple.

On one side, if Europe does not develop euro stablecoins, the global on-chain payments market may become even more dollar-dominated. European companies and financial institutions could become more dependent on dollar liquidity in digital markets.

On the other side, the ECB remains cautious. Reuters reported in May 2026 that the ECB pushed back against proposals to boost euro stablecoins by loosening rules, citing risks to financial stability, bank deposits, and monetary policy transmission. (Reuters)

ECB economists have raised similar concerns. A wider use of stablecoins could drain bank deposits, reduce bank lending to the real economy, and, if dollar-based assets spread widely in Europe, import foreign monetary conditions into the euro area. (Reuters)

Europe’s realistic strategy is therefore not simply to “grow euro stablecoins at any cost.” It needs a more refined model.

Europe should distinguish between payment stablecoins, tokenised bank deposits, central bank money settlement, and tokenised capital markets — while ensuring that these layers can interoperate.

Payments should be fast. Savings should remain stable. Investment should take place through regulated instruments.

Europe’s realistic strategy: four pillars

As of June 2026, Europe’s digital financial strategy is likely to rest on four pillars.

The first pillar is the digital euro.

The digital euro is a public infrastructure project for European payment sovereignty. Its purpose is not to replace cash, but to ensure that safe central bank money remains available in the digital age. It also carries strategic importance by reducing Europe’s dependence on U.S.-dominated card networks and private payment platforms.

The second pillar is the euro stablecoin.

A euro stablecoin could allow Europe to participate in global on-chain payments. But under the European regulatory model, it is more likely to function as a payment instrument than as an interest-bearing savings product. Its role should be in trade settlement, e-commerce, corporate payments, and tokenised asset transactions.

The third pillar is tokenised bank deposits.

Tokenised deposits would allow Europe to connect the existing banking system with blockchain-based finance without bypassing banks entirely. Users could retain the stability and regulatory protections of bank deposits while gaining access to programmable payments and digital financial services. This is especially important for Europe’s bank-centred financial system.

The fourth pillar is tokenised capital markets and wholesale central bank money.

This is where Switzerland offers one of Europe’s most important real-world reference points.

Switzerland is not an EU member state, but it is one of Europe’s most advanced financial centres. Its Project Helvetia has become one of the clearest demonstrations of how tokenised capital markets could work with central bank money.

Project Helvetia is a multi-phase initiative involving the Swiss National Bank, the BIS Innovation Hub, and SIX. Its central question is simple but crucial: if financial assets become tokenised, how should they be settled safely in central bank money? (bis.org)

The key infrastructure is SIX Digital Exchange, or SDX. SDX is a regulated, distributed ledger technology-based financial market infrastructure for digital assets. In Helvetia Phase III, the SNB issued real Swiss franc wholesale CBDC on the SDX platform to settle digital securities transactions. SIX described it as the first time a real Swiss franc wholesale CBDC would settle digital securities transactions. (SIX)

Former SNB Chairman Thomas Jordan described Helvetia III as the world’s first issuance of wholesale CBDC on a regulated third-party platform to settle commercial transactions with tokenised assets. He argued that wholesale CBDC can help bring tokenised assets and tokenised central bank money together on a single platform, supporting safer and more efficient settlement. (bis.org)

The experiment has moved beyond theory. The SNB has been providing wholesale CBDC for financial institutions on the SDX trading and settlement platform since the end of 2023. In June 2025, the SNB announced that it would extend the pilot until at least mid-2027, while making clear that this does not yet mean a permanent wholesale CBDC will be introduced. (snb.ch)

This matters because retail digital money and wholesale digital money solve different problems.

A retail digital euro is about payments for citizens, merchants, and businesses. Wholesale CBDC is about the deeper plumbing of finance: government bonds, corporate bonds, repos, securities settlement, collateral management, and central bank liquidity.

If Europe wants a true digital financial ecosystem, it cannot stop at consumer wallets. It must also modernise the capital-market layer where institutional money moves.

This is why the ECB’s Appia Roadmap is important. In March 2026, the Eurosystem unveiled Appia as a roadmap for Europe’s tokenised finance ecosystem, with central bank money remaining the anchor of the financial system amid digital transformation. The roadmap is expected to conclude in 2028. (European Central Bank)

BIS Project Agorá points in the same direction. The project explores how tokenised central bank reserves and tokenised commercial bank deposits can work together in wholesale cross-border payments while preserving settlement finality, compliance, and data privacy. (bis.org)

The future competition is therefore not about which central bank launches a CBDC first. It is about how central bank money, commercial bank deposits, stablecoins, and tokenised securities operate together on shared standards and interoperable infrastructure.

What would make users choose Europe’s model?

Technology alone is not enough.

Users need a reason to choose it. A European digital financial ecosystem will not succeed simply because it is well regulated. It must offer clear practical benefits to individuals, companies, banks, fintechs, asset managers, and institutional investors.

For individuals, the appeal could be faster payments, lower fees, offline functionality, privacy protection, and smooth integration with bank accounts.

For companies, the benefits could include cheaper cross-border payments, instant settlement, automated trade finance, lower foreign exchange costs, and standardised European payment infrastructure.

For banks, tokenised deposits could allow participation in blockchain finance while preserving the deposit base.

For asset managers and institutional investors, the key is different. They need tokenised government bonds, tokenised money market funds, tokenised corporate bonds, and tokenised collateral assets that can be settled in central bank money or in safe bank money.

Because MiCA prohibits interest on e-money tokens, Europe’s model is unlikely to centre on interest-bearing stablecoins. A more realistic model separates payments, savings, investment, and wholesale settlement. (eur-lex.europa.eu)

Payments should be fast.

Savings should remain in bank deposits or tokenised deposits.

Investment should be channelled into regulated products such as tokenised government bonds, money market funds, and corporate bonds.

Wholesale settlement should be anchored in central bank money or infrastructure directly connected to central bank money.

This structure offers the best chance of combining user convenience with financial stability.

Conclusion: Europe must design, not merely defend

As of June 2026, the global financial order is moving from a currency competition into an infrastructure competition.

The dollar is not weak. It remains dominant in foreign exchange reserves and foreign exchange markets. But the dollar-centred order is being rebuilt under higher fiscal and geopolitical pressure.

The United States is using dollar stablecoins to extend dollar dominance into digital finance. China is using the digital yuan, CIPS, and mBridge to build a parallel payments network that can support transactions without the dollar when necessary.

Europe’s challenge is not to choose between Washington and Beijing.

Europe’s real question is whether it can build its own standards for payments, deposits, capital markets, wholesale settlement, and tokenised assets.

MiCA gives Europe a defensive shield. It can limit the unchecked expansion of non-compliant or non-euro stablecoins inside the European market and give policymakers time to build a European alternative. But regulation alone does not create a platform. It only creates the conditions in which a platform can emerge.

Switzerland’s Project Helvetia and SDX show what the next stage could look like. The future of digital finance will not be built only through consumer wallets. It will be built when government bonds, corporate bonds, repos, collateral, bank deposits, and central bank money can all move safely across tokenised infrastructure.

The digital euro is a starting point. But it is not enough.

If Europe wants strategic autonomy in the new financial order, it needs a broader euro-based digital financial ecosystem: the digital euro, euro stablecoins, tokenised bank deposits, wholesale central bank money, and tokenised capital markets working together.

The future of monetary power will not be determined only by the name printed on banknotes or the prestige of a central bank.

It will be determined by the networks on which money moves, the assets it connects to, the standards it follows, and whether users around the world have a real reason to choose it.

Europe’s strategic choice is clear: remain a defender of monetary sovereignty, or become one of the architects of the new digital financial order.