The Euro’s Growing Reserve Currency Status
The euro currently stands as the world’s second-largest reserve currency, although it still lags significantly behind the U.S. dollar. Many European Union leaders see enhancing the global role of the euro as essential for strengthening regional stability and opening up more opportunities for member states.
Upcoming Talks Highlight an Ambitious Agenda
In upcoming discussions, EU leaders have outlined a comprehensive plan to elevate the international status of the euro. This strategy includes issuing euro-backed digital assets such as stablecoins, tokenized deposits, and central bank digital currency (CBDC). Another key focus is expanding euro-denominated lending, including joint issuance by multiple countries, with loans to other regions denominated in euros.
Leaders are also considering establishing a regional payments network that could rival the infrastructure provided by Visa and Mastercard within the EU.
Stablecoins on the Rise
The push for more euro-backed digital assets has intensified in recent years, as stablecoins from Circle and Tether have started moving trillions of U.S. dollars globally. These stablecoins are now being used by banks, retailers, and social media companies, with their applications continuing to expand.
While some euro-backed stablecoins do exist, they represent only a small share of the market. This has fueled calls for a digital euro, although the CBDC faces resistance from banks and lawmakers who fear it might compete with their products or raise concerns about privacy and financial stability.
Strengthening Real-Time Payments
Beyond digital assets, the EU is working to bolster its real-time payments systems. Efforts include integrating domestic mobile payments platforms under a single framework and connecting with real-time payment networks abroad.
Recent plans involve linking the EU’s instant payments infrastructure with India’s UPI system, creating a significant global payments channel. The EU and India also signed a major Free Trade Agreement, which aligns their economies in several areas, particularly in financial services.
The ultimate aim is to position the EU as a stronger global financial force, despite challenges posed by established players like U.S. stablecoins, card networks, and cross-border payment systems.
