The Stablecoin Gap: Why the US Pulled Ahead, and Europe Is Still Catching Up

Five years ago, stablecoins were still easy to dismiss. They looked like a niche product for traders, a bridge asset for crypto markets, or a temporary workaround for a financial system that was still deciding what digital money should look like.

That framing no longer works.

Today, stablecoins sit at the intersection of payments, settlement, regulation, and monetary power. They are no longer just a crypto instrument. They are becoming part of the financial infrastructure that moves value across borders, between institutions, and increasingly between business models.

And if you look at the market honestly, one conclusion stands out: the United States pulled ahead because it allowed dollar stablecoins to become the default digital money layer. Europe, meanwhile, built a stronger rulebook than many expected, but has not yet translated that into market scale.

That gap matters far beyond crypto.

It matters for fintech. It matters for banks. It matters for payment providers. It matters for policymakers.

And it matters for anyone who still believes that monetary influence in the digital economy is going to be shared evenly by default.

A five-year shift

Stablecoins have grown from a specialist tool into a major digital liquidity layer.

ECB analysis places stablecoin market capitalisation at roughly $300 billion in early 2026. That number alone tells part of the story. The more important part is how quickly stablecoins have moved from the margins of crypto into the architecture of digital finance.

But the real divide is not the size of the market. It is the currency that dominates it.

According to ECB analysis, more than 99.7% of stablecoins are USD-denominated. Euro-denominated stablecoins remain in the low hundreds of millions of euros. That is not a minor imbalance. It is a structural outcome.

It means that when the market needed a digital settlement asset, it chose the dollar.

That choice has consequences.

The US: digital dollar dominance by market design

The United States did not need to announce a grand strategy to win the stablecoin market. In practice, it allowed one to emerge.

The result is a digital dollar ecosystem that now sits inside crypto trading, cross-border transfers, wallets, treasury flows, and emerging fintech products. Stablecoins have become a programmable extension of dollar liquidity.

That gives the US three advantages.

First, it extends the reach of the dollar into digital markets. A stablecoin can move quickly, settle quickly, and function across time zones in a way that legacy rails still struggle to match.

Second, it reinforces demand for dollar-linked reserve assets. Stablecoin issuers hold backing assets, and those reserves tend to support the centrality of US safe assets in the digital economy.

Third, it creates network effects. Once businesses, traders, and platforms standardise on dollar stablecoins, the system begins to reinforce itself. Liquidity attracts liquidity. Trust attracts adoption. Adoption attracts infrastructure.

This is why the stablecoin story is bigger than crypto.

The ECB has warned that USD stablecoins can amplify the international transmission of US monetary policy. Put more plainly, the dollar is gaining another distribution channel.

That is a strategic gain for the US. Whether it intended to or not, it now has a digital version of dollar dominance that reaches far beyond traditional banking rails.

The UK: pragmatic, not passive

The UK has taken a more practical approach than many in Europe.

The Bank of England has moved toward a framework for systemic stablecoins that tries to balance innovation with financial stability. That matters because it shows a willingness to treat stablecoins as part of the payments system rather than as a purely speculative object.

For fintech and payments leaders, that distinction is critical.

A market can debate stablecoins endlessly, or it can build a usable regime around them. The UK appears to be choosing the second path.

The commercial significance is not that the UK has solved every issue. It has not. The significance is that it has created a path where regulated stablecoin models may actually get to scale.

That is where the UK becomes interesting: not as a winner-takes-all market, but as a bridge between traditional finance and digital finance.

Switzerland: testing before scaling

Switzerland is following a different logic.

Rather than trying to dominate immediately, it is using controlled experimentation.

The CHF stablecoin sandbox involving six banks and Swiss Stablecoin AG is important because it shows that stablecoins are no longer only a crypto-native idea. Banks are willing to test them too, provided the structure is credible and the use case is clear.

That makes Switzerland a serious laboratory for regulated digital money.

Its strength is not scale. Its strength is institutional trust.

That combination matters because the future of stablecoins will not be determined only by the loudest crypto projects. It will also be shaped by whether banks, regulators, and infrastructure providers can agree on models that are both technically useful and politically acceptable.

Switzerland is testing that proposition in a measured way.

Europe: a strong rulebook, but not yet enough market power

Europe deserves real credit for MiCA.

In a market that often moves faster than policy can follow, Europe built one of the most comprehensive digital asset frameworks in the world. That is a genuine achievement.

But regulation is not the same as market leadership.

That is where the stablecoin conversation becomes uncomfortable for Europe.

The ECB has remained cautious on euro stablecoins, and the market has responded accordingly. Euro-denominated stablecoins remain tiny compared with USD stablecoins. The implication is hard to avoid: Europe may have the better rulebook, but it does not yet have the same economic gravity.

This is not a failure of talent or technology. Europe has both.

It is a failure of conversion.

The policy foundation exists. The market size does not.

And in financial infrastructure, that matters more than many people want to admit.

If the euro does not secure a meaningful role in stablecoin issuance and usage, then Europe risks becoming a region that regulates a market whose default operating layer is still defined elsewhere.

That is a subtle form of dependence. It is also a strategic one.

Qivalis and the case for more European action

Qivalis is a useful sign that Europe has not given up on scale.

The bank-led consortium has grown to 37 financial institutions across 15 countries. That is not a symbolic number. It shows that major European institutions understand the issue and are trying to respond.

That is exactly why projects like Qivalis matter.

Europe does not need more commentary about stablecoins. It needs more attempts to build them in a compliant, bank-grade, euro-native way.

If the ECB and the European Commission want to strengthen Europe’s position, this is the kind of initiative they should encourage. The market will not be rebuilt by regulation alone. It will be rebuilt by regulation plus execution.

That is the missing combination.

What this means for payments

For payments, stablecoins are becoming a direct challenge to friction.

They can move value quickly. They can operate across borders. They can be programmed into workflows in ways legacy payment systems were not designed to handle.

That is why payment companies, fintechs, and enterprise treasury teams are watching this market closely.

The question is no longer whether stablecoins can move money. They can.

The question is whether they can become the preferred settlement layer for more of the global economy.

Right now, USD stablecoins have the lead.

They have more liquidity, more usage, and more network effect.

Europe’s challenge is that payment systems are not won by legal clarity alone. They are won by usability, interoperability, and scale.

What this means for settlement

Settlement is where the institutional case for stablecoins becomes strongest.

If value can settle faster and with fewer intermediaries, the economics of finance begin to change. That is why banks, market infrastructure firms, and regulated fintechs are paying attention.

The UK and Switzerland are both showing that institutional stablecoin models can be tested in regulated environments. Europe, through MiCA and through projects like Qivalis, has the ingredients to do the same.

But testing is not the same as winning.

Scale still decides whether a pilot becomes a standard.

What this means for monetary power

This is where the stablecoin story becomes strategic.

If the dominant stablecoin remains dollar-based, the US does not just dominate a product category. It strengthens the reach of its currency inside the digital economy.

That is not theoretical. It is already happening.

The ECB has acknowledged the risk that USD stablecoins could amplify the international transmission of US monetary policy. That should be read as a signal, not a footnote.

Europe’s challenge is therefore not only commercial. It is monetary.

If the euro does not matter inside stablecoin infrastructure, then Europe’s currency influence in the digital economy will remain weaker than its regulatory ambition.

That is an uncomfortable trade-off.

Being the strictest market is not the same as being the most influential one.

What this means for geopolitics

Stablecoins may look technical, but they are becoming part of economic statecraft.

A dollar stablecoin ecosystem expands the digital footprint of the US. A weak euro stablecoin ecosystem limits Europe’s ability to project financial influence in a tokenised, always-on global market.

That is why this debate matters outside crypto.

It matters to central banks.

It matters to finance ministries.

It matters to payment companies.

It matters to banks trying to modernise.

And it matters to any founder building in regulated digital finance.

If digital money becomes infrastructure, then the currency that dominates digital money becomes strategically important.

At the moment, that currency is still overwhelmingly the dollar.

Europe is not out of the race

Europe should not be written off.

It has MiCA. It has capable institutions. It has the credibility to lead on trust. It has bank groups willing to test the model. It has projects like Qivalis that show market intent.

What it does not yet have is enough scale.

That is why the next phase matters so much.

Europe can still catch up if it moves quickly enough and if it accepts that good regulation is only the starting point.

The real test is whether policy strength can be converted into market strength.

If it can, Europe still has a path.

If it cannot, then the stablecoin gap will become harder to close with every year that passes.

And by then, the market will already have chosen its default rails.

The question Europe should ask now

The question is not whether stablecoins matter.

They already do.

The question is whether Europe wants to remain a rule-maker in a market whose operating layer is set elsewhere or whether it wants to build enough scale to shape that layer itself.

That is the real stablecoin gap.

And it is still open.

About the Author

Joseph Zammit is a CMO and CSO in fintech and crypto, with 25+ years at the intersection of marketing, strategy, and regulation. He helped design Malta’s pioneering DLT framework, launched the country’s first Neobank, and led the global expansion of crypto and Web3 platforms, turning complex regulatory and market conditions into clear go‑to‑market decisions. He is a member of the Crypto Valley Association.

The Stablecoin Gap: Why the US Pulled Ahead, and Europe Is Still Catching Up was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.