Stablecoins are no longer a crypto story. With a global market capitalisation exceeding $305 billion and annual transfer volumes that surpassed Visa and Mastercard combined in 2024, they have crossed into mainstream financial infrastructure.[1] If your financial institutions hasn’t formed a clear view on what this means operationally, strategically, and from a compliance perspective, the time to do so is now.

This article covers what financial institutions need to understand: how stablecoins work and why they lead the field among digital money formats, why dollar dominance is a geopolitical issue rather than just a market fact, what banks entering this space are discovering, and how the regulatory frameworks on both sides of the Atlantic are taking shape. With USDT and USDC alone accounting for 93% of the global stablecoin market and euro-denominated alternatives representing less than 0.3%, dollar dominance in this space is hard to overstate.[2] The central question for Europe is whether a consortium of 37 banks united under the Qivalis initiative can still mount a credible answer, or whether the window has already closed.

The basics are worth getting right

Stablecoins are blockchain-based digital tokens that maintain a stable value relative to a reference asset, typically a fiat currency like the US dollar or euro. They combine the programmability and settlement speed of crypto infrastructure with the predictability of sovereign currency

To understand where stablecoins fit, it helps to look at the broader landscape of digital money. Three main formats are commonly discussed: cryptocurrencies, Central Bank Digital Currencies (CBDCs), and stablecoins. Of these, stablecoins are the most developed, in both adoption and regulatory clarity. Cryptocurrencies remain highly volatile and speculative. CBDCs are a different matter: as of mid-2025, 137 countries representing 98% of global GDP are exploring them, with 49 in active pilot, but despite that global momentum stablecoins have moved faster and are already deployed at scale in commercial applications that CBDCs are still testing.[3]

Privately issued, not sovereign money

One distinction that often gets overlooked is that stablecoins are privately issued instruments, not sovereign money. A stablecoin is only as stable as the entity behind it. Its value depends entirely on the issuer’s reserve management, governance practices, and regulatory compliance. There is no central bank backstop. If the issuer mismanages its reserves, faces a redemption run, or loses regulatory standing, the coin can suddenly lose its fixed value. The TerraUSD collapse in May 2022 illustrated this, when design flaws and a loss of confidence wiped out tens of billions of dollars in market value within days. [4] Before incorporating stablecoins into their products or processes, this is the first thing any institution should understand. CBDCs carry no such risk: they are sovereign money issued directly by central banks, and governments retain full control over their issuance. Governments can also programme features such as spending restrictions or targeted distribution directly into the currency.

The cross-border payment advantage

Cross-border payments are where the efficiency advantage becomes impossible to ignore. A traditional payment through Society for Worldwide Interbank Financial Telecommunication (SWIFT) does not travel directly from sender to receiver. It passes through a chain of correspondent banks, each adding time, cost, and friction. A single payment may cross three to five entities before reaching its destination, incurring fees up to $50 and taking one to three business days to settle.[5] A stablecoin payment eliminates that chain entirely. The token moves directly from sender to receiver on a blockchain, with no intermediaries and settlement in under five seconds at a cost below one cent.

Three ways businesses are using stablecoins

One of the three ways in which standout businesses are using stablecoins is for cross-border payments. They are cheaper and faster than traditional methods, so the benefits are clear. The second way is to protect company cash. In countries with high inflation, where the local currency quickly loses value, companies can hold stablecoins instead, since their value remains stable. The third use is for automated payments. Because stablecoins run on code, they can automate payments, eliminating manual checking and approval of each transaction and saving time while reducing errors.[6]

Dollar dominance is a geopolitical issue, not just a market fact

The dollar dominance is striking. As the gap between USDT, USDC, and euro-denominated alternatives already shows, this imbalance is not just a market preference. It reflects a structural problem with geopolitical consequences. The dollar stablecoin ecosystem is self-reinforcing: the larger it grows, the harder it becomes for alternatives to gain traction. Network effects in payments are powerful and slow to reverse.

The European Central Bank (ECB) has been direct about what this means for Europe. A July 2025 blog post warned that dollar dominance in stablecoins would give the United States strategic and economic advantages, allowing it to finance its debt more cheaply while exerting global influence, and would leave Europe with higher financing costs, reduced monetary policy autonomy, and geopolitical dependency.[7] A March 2026 ECB working paper went further, warning that widespread adoption of dollar-denominated stablecoins in the euro area could trigger retail deposit outflows, constrain European banks’ lending capacity, and in extreme cases amount to a form of partial currency substitution. [8]

For European corporates, the dependency is already real. Companies that have moved to stablecoin rails for cross-border payments are almost all doing so on dollar infrastructure. In practice, this means they are relying on US financial systems, even for payments that have nothing to do with the United States.

Case in point: Meta’s return to stablecoins

In 2019, Meta (then known as Facebook) announced Libra, a stablecoin backed by a basket of national currencies that was designed to function as a global digital currency.[9] Governments and central banks on both sides of the Atlantic pushed back hard, citing concerns about monetary sovereignty, privacy, and systemic risk. The project was progressively scaled back, rebranded as Diem, and ultimately shut down in early 2022 when its assets were sold off. At the time, the regulatory climate simply didn’t support it.

The climate has changed. Meta is planning a stablecoin comeback in the second half of 2026, this time taking a fundamentally different approach.[10] Rather than issuing its own coin, Meta is positioning itself as a distribution channel, integrating third-party stablecoin rails across Facebook, Instagram, and WhatsApp. Stripe, the payments company widely used by businesses to process online transactions, is reported to be the likely infrastructure partner.[11] Its CEO Patrick Collison joined Meta’s board in April 2025. For Europe, the implications are significant. Meta has more than 3 billion users globally. If stablecoin payments become embedded in its platforms, the adoption curve for dollar-pegged digital payments accelerates at a scale no European initiative has yet matched, and the window for euro-denominated alternatives to compete on distribution narrows further. That dynamic is exactly what European banks are now racing to get ahead of.

A new playing Field for Financial Firms

The opportunity

Major banks view stablecoins as both a risk and an opportunity. Those that do not act risk losing ground to tech companies and crypto companies, which could take over payment services, along with money and client data that come with them. However, banks that do act can update their business model, find new revenue streams and offer clients services that are not currently available.

The clearest opportunity lies in cross-border payments. Stablecoins eliminate the correspondent banking chain, reducing costs and settlement times for corporate clients. For banks, this means retaining clients who might otherwise turn to fintech alternatives, while also generating income from the reserves backing stablecoin issuance. The revenue model is straightforward and the competitive advantage is clear.[12]

JPMorgan has already taken action, expanding its JPM Coin platform to support euro-denominated payments with Siemens being its first corporate client. Additionally, in early 2025, Bank of America’s CEO indicated that the bank would launch its own stablecoin. Citigroup, PayPal, and others have signalled varying degrees of interest. The question is no longer whether banks will participate in this market. Rather, it is whether their compliance and operational infrastructure can keep up with the speed at which deployment is happening.[13]

The risk

These opportunities come with significant operational and reputational complexities.

Compliance

The biggest issue is compliance. Stablecoin payments happen all day and night, every day of the week, raising the bar on monitoring that many banks already do in real time for other payment rails. They need to continuously monitor for suspicious activity, signs that an issuer might encounter difficulties. They also need to monitor unusual account behaviour and cash-out requests on a scale that batch-based checks were never designed to handle.

The risk of regulatory scrutiny and criminal misuse is real, not just a theoretical concern. According to Chainalysis, 63% of illicit crypto transaction volume in 2024 was attributed to stablecoins, linked to money laundering, sanctions evasion, and financial crime.[14] While this reflects usage patterns more than inherent risk, it signals the intensity of scrutiny that any bank entering this space should expect. Know Your Customer (KYC) processes need to be rethought from the ground up. Both the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act and the EU’s Markets in Crypto-Assets Regulation (MiCAR) require KYC obligations to extend to blockchain wallet addresses, something most existing programmes were not designed to handle. Leading compliance teams are responding with a triple-layer approach, monitoring simultaneously at the blockchain, transaction, and broader ecosystem levels.

Beyond compliance, three further risks run through any stablecoin strategy: security, who is backing the coin, and whether it can hold its value.

Security, backing, and value risk

Security became a serious concern after the 2025 Bybit hack, in which hackers stole $1.4 billion. [15] It showed clearly what can go wrong when companies don’t properly protect digital assets. Counterparty and issuer risk is structural: private entities, not central banks, issue stablecoins, so companies need to check each issuer’s reserves and reputation on their own. The last risk is whether the coin can keep its value. The TerraUSD collapse in 2022 showed that even a popular stablecoin can suddenly lose its value, causing panic as everyone tries to cash out at once.

Client trust and education

There is also a risk that sits one step further out but is not less consequential. Most retail and corporate clients currently have little understanding of how stablecoins work, what backs them, or how they differ from familiar payment methods. That knowledge gap directly creates a trust gap, and trust has to be there before adoption can happen. Financial institutions that move fast on deployment without investing equally in client education are likely to find their clients do not follow. Building that understanding is not a marketing problem. It is a core part of what it means to introduce a genuinely new financial instrument responsibly.

The European response: Qivalis

The dependency on dollar-denominated stablecoins, and the pressure that creates for European banks to act, has produced a concrete response. The response comes from Qivalis, a joint venture launched by a consortium of 37 European banks building a fully regulated, 1:1-backed euro stablecoin, scheduled for launch in the second half of 2026.[16] The membership includes major companies such as BBVA, BNP Paribas, ING, UniCredit, Rabobank, and CaixaBank, spanning nearly every major European market. A full list of participating banks is available on the Qivalis website.

The intent is clear. European companies currently lack access to a regulated, European-issued digital settlement asset that does not route through US financial infrastructure. Qivalis is designed to provide one.[17] Jan-Oliver Sell, CEO of Qivalis, has described the problem directly: with only dollar stablecoins available at scale, European companies depend on US-controlled digital rails for cross-border commerce.

The regulatory approach is MiCAR-compliant from the outset. That matters, because MiCAR is the dedicated framework the EU has built specifically for crypto-asset issuers and service providers. Qivalis is not seeking exemptions or operating in a regulatory grey zone. It is not working around the rules; it is built to operate within them.

The Competitive Landscape

The challenge ahead is real. Network effects in payments are strong and slow to shift. The clearest example is EURC: Circle, an American company, currently issues the largest euro-denominated stablecoin in circulation.[18] That is the exact problem Qivalis is meant to solve: a non-European issuer controls even the leading euro stablecoin today, leaving European companies dependent on a US company for euro-denominated digital money.

MiCAR, meanwhile, has pushed Tether’s USDT out of the EU entirely. With MiCAR’s final compliance deadline on 1 July 2026, licensed European exchanges have been delisting USDT because Tether never sought the required authorisation.[19] Reaching enough liquidity to actually be useful will not be easy for Qivalis either, but it enters a market where regulation has already excluded the largest dollar-based competitor, and the largest euro alternative remains foreign-owned.

The Trust Gap

There is also a trust dimension that should not be underestimated. Qivalis is a new instrument from companies that most retail and corporate clients will not immediately associate with digital money. Even with 37 banks behind it, client familiarity with euro stablecoins is low. The consortium will need to invest in building that understanding, not just in building the product.

The conditions for Qivalis to succeed are improving. Geopolitical fragmentation is raising European appetite for alternatives to dollar infrastructure. Regulatory clarity under MiCAR gives it a foundation that earlier euro-stablecoin efforts lacked. Whether that is enough depends on execution, and execution depends on the regulatory rules Qivalis and every other stablecoin issuer now has to operate within.

What this means in practice

The stablecoin transition is not a future scenario. It is happening now, and it is moving faster than most formal planning cycles were built to accommodate.

For banks

For banks, the question is no longer whether to engage with stablecoin infrastructure but how quickly and through which route. That means assessing whether they can issue, store, and convert stablecoins into traditional currency and back, against existing regulatory frameworks. It also means identifying partnership opportunities with issuers or infrastructure providers, and adapting compliance architecture for real-time, 24/7 monitoring before deployment decisions are made, not after.

For European companies

For European companies operating in stablecoins, the dual-licence requirement (MiCAR plus EMI) is now the compliance baseline, not a stretch goal. The EBA’s June 2025 No Action Letter and February 2026 clarifications were not ambiguous: companies supporting EMT payment flows that have not obtained a payment firm or EMI licence are operating outside the framework. The zerohash precedent, secured in May 2026 from De Nederlandsche Bank, sets the benchmark. Any European-based company looking to participate in stablecoin infrastructure, whether as an issuer, custodian, or payment processor, should treat obtaining both licences as an immediate priority, not a future-quarter agenda item.

For compliance teams

For compliance teams specifically, wallet-level screening is no longer optional. Stablecoins appear disproportionately in illicit flows relative to their market share, and that pattern will attract regulatory scrutiny across European jurisdictions. Blockchain analytics tools are baseline infrastructure, not specialist add-ons. The governance frameworks for when to freeze assets, escalate internally, and file reports need to exist before an issue arises, not during one.

The architecture of digital money is being built right now. Companies that treat stablecoins as a compliance problem to manage rather than infrastructure to understand are already operating with an incomplete picture. The decisions being made in the next 12 to 18 months will set positions that will be difficult to change.

Conclusion

Stablecoins are no longer an experiment on the edge of finance. They are becoming core infrastructure for cross-border payments, corporate treasury, and increasingly, for the platforms billions of people already use every day. The dollar’s dominance in this space did not happen by accident, and it will not reverse by accident either.

For Europe, the stakes go beyond market share. A digital financial system built almost entirely on dollar rails carries real consequences for monetary autonomy, financial stability, and strategic independence. Qivalis represents a credible, regulated attempt to close that gap, but it enters a market shaped by entrenched network effects, an American company holding the largest euro stablecoin position, and a regulatory environment that, while more developed than its US counterpart, is still finding its footing in practice.

Execution, not ambition, will decide what happens next. Three things will determine that: how quickly European banks can build trust and liquidity, how consistently EU member states apply the rules they have agreed to, and how seriously financial companies across the continent respond to a shift that is already underway. The window to act is not unlimited. The companies that move early, and move deliberately, will be the ones that shape what European digital money looks like, rather than simply adapting to a market someone else has already built.

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Stablecoins in Europe: The Race for Digital Money