A coalition of nine major European banks is working to launch a MiCA-regulated euro stablecoin by 2026, aiming to streamline euro-denominated payments across Europe and challenge US dollar stablecoins.

A new company in the Netherlands will oversee the project, licensed and supervised by the Dutch Central Bank as an e-money institution, though technical details remain undisclosed.

This initiative emphasizes the importance of regulatory clarity, with compliance to MiCA and local licensing being critical to fostering stability and innovation.

The project aims to improve cross-border payments within Europe, with the stablecoin accessible through participating banks, and plans to integrate seamlessly with existing payment infrastructures.

The stablecoin will be backed by stable assets to ensure value stability, making it suitable for digital payments rather than speculative trading, and will leverage blockchain technology for transparency.

This move is also a response to US developments, where authorities have promoted dollar-backed stablecoins and even banned CBDC development, raising concerns about US dominance in global digital payments.

The success of this euro stablecoin will depend on regulatory rigor, transparency, liquidity, and interoperability, with potential scenarios ranging from widespread adoption to coexistence with other digital currencies.

Overall, the initiative offers opportunities for fintechs and SMEs to innovate within a clearer regulatory environment, but faces challenges from technological risks, market fragmentation, and geopolitical competition.

Key risks include reserve management, technological standards, regulatory compliance, interoperability with systems like SEPA Instant, and competition from existing dollar stablecoins and digital euro projects.

Despite promising developments, experts warn that the euro stablecoin market remains small and fragmented, with concerns about cross-border issuance frameworks and European monetary sovereignty.

Regulatory tensions persist, with the European Central Bank expressing concerns that MiCA may be too lenient and warning about US tokens undermining euro stability, while advocating for stricter oversight of non-EU issuers.

The initiative is part of Europe's broader strategy for digital sovereignty, aiming to develop a trustworthy, regulated alternative to US dollar-backed stablecoins and to support the digital euro agenda.