EU urged to embrace a hybrid digital finance future

Professor Lucrezia Reichlin writing for the economic think tank Bruegel, argues that the EU must pair a digital euro with regulated private stablecoins to avoid being sidelined by dollar-denominated crypto innovation.

With decentralised finance (DeFi) promising faster, programmable, and cross-border payments, Europe risks “digital dollarisation” if it relies solely on a central bank digital currency. A two-tier system - CBDCs as the trusted settlement layer and fully backed stablecoins or tokenized deposits for programmable payments - could drive innovation, preserve financial stability, and strengthen the euro’s global role.

Reichlin warns that without ECB support, even euro-stablecoins cannot be truly risk-free, underscoring the enduring need for public trust as the foundation of money in a digital age.

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