The digital currency is expected to launch by 2029, in a push to bolster European autonomy in payments away from the dominance of the US dollar.

Scott Melker outlines the different approaches Europe, the US, and the UK are taking to stablecoin regulation.

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• The Senate passed H.R. 6644 by an 85-5 vote on Monday, including language prohibiting the Federal Reserve from issuing a CBDC.

• The provision bars the Fed from creating a CBDC through intermediaries but excludes open, permissionless, and private stablecoins.

• The measure revives key elements of Rep. Tom Emmer's Anti-CBDC Surveillance State Act, which previously stalled in the Senate.

The US Senate on Monday advanced a four-year ban on central bank digital currencies on a Federal Reserve central bank digital currency by a vote of 85-5, tucked inside a sweeping housing bill. The bill could be fast-tracked as early as Tuesday for a final vote to be reached, upon which it would automatically move for President Trump's signature.

The bill language prohibits the Fed from "issu[ing] or creat[ing], directly or indirectly, a CBDC. The provision includes an exemption for "open, permissionless, and private" stablecoins.

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The anti-CBDC language resurrects key provisions of Rep. Tom Emmer's Anti-CBDC Surveillance State Act, a proposal that had previously stalled in the Senate after passing the House.

Monday's vote was the third major congressional vote on the same package. The Senate first passed the package 89-10 in March, and the House amended it and passed it 396-13 in May.

Housing Bill As Legislative Vehicle

The CBDC language was tucked into the broader housing package, which Senate Banking Committee Chairman Tim Scott (R-S.C.) called the biggest push for bipartisan housing reform in decades. The legislation primarily focuses on increasing housing supply, reducing regulatory burdens, lowering costs for families, and incentivizing private-sector investment in housing.

Key provisions include streamlining environmental reviews, modernizing manufactured housing rules, updating multifamily financing tools, and limiting certain large institutional investors from crowding out families in residential markets, according to the Senate Banking Committee.

The legislation also arrives amid growing opposition to a US CBDC among senior policymakers. Treasury Secretary Scott Bessent has said a US central bank digital currency is "off the table."

New Federal Reserve Chair Kevin Warsh has opposed a US CBDC for years, calling the concept "a bad policy choice" during his Senate confirmation hearing and arguing the Fed "does not have the right" to issue one. His longstanding position has been a consistent thread in his case for keeping the dollar's digital evolution in private hands rather than state-issued ones.

The euro will not become a global reserve currency "overnight", European Central Bank President Christine Lagarde said on Monday in Brussels, urging lawmakers to complete the capital markets union, which she described as the most important step.

Europe is considering how to expand the global role of the euro as US President Donald Trump's confrontational approach to foreign policy and trade has accelerated the debate.

At the centre of the discussion are three main challenges: reducing dependence on US payment infrastructure, complete the EU reform agenda, and making the euro a competitive global currency, in a landscape where the dollar's supremacy is no longer guaranteed.

"It doesn't happen overnight. If you look at history, no currency has been an international reserve currency unless and until it had the capacity to defend itself and to have the military might to resist counterparts," Lagarde said during the event.

US giants Visa and Mastercard account for 61% of card payments in the eurozone and nearly all cross-border transactions, according to European Central Bank (ECB) data from 2025.

To address this, the EU has pushed for the approval of the digital euro, a public digital currency backed by the ECB and designed to complement banknotes. The legislation is expected to be approved by the end of 2026, with a crucial vote due to take place on Tuesday in the European Parliament.

Alongside the digital euro, the ECB unveiled a new payments strategy at the end of March, including the creation of two network infrastructures, known as "Pontes" and "Appia", designed to adapt the institution to emerging technologies such as tokenisation and distributed ledger technology (DLT).

The ECB's aim is to anchor central bank money, guaranteed by the institution, within this new technology-driven payments landscape. Lagarde mentioned as pressing priorities the development of such infrastructures, alongside the approval of the digital euro and the reform of the European capital markets.

The ECB's push to implement this strategy is partly a response to the rise of privately issued stablecoins — crypto assets designed to be less volatile — which have steadily gained ground in the payments sector and operate on these new technologies.

While countries such as Russia and China have adopted their own public digital currencies, the US is moving in a different direction. Trump abandoned plans for a Federal Reserve digital dollar in favour of stablecoins.

The Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, which provides a regulatory framework for these crypto assets.

President Trump brought several leading technology executives to the G-7 for a special meeting focused on artificial intelligence.

However, European Central Bank President Christine Lagarde used a speech in Venice on June 17 to warn that AI could potentially contribute to dangerous financial crisis, adding that the ECB is determined to prevent that from happening.

According to Lagarde, "We cannot stop artificial intelligence, even with our sound regulations." She added, "What we can do, however, is prepare ourselves so that our citizens can benefit from it and be protected from its dangers, and that's what we're doing."

In effect, Lagarde was defending the EU's Digital Services Act, and the timing of her remarks appeared intended to counter the influence of U.S. technology executives at the G-7. It is further evidence of the widening divide between Europe and the U.S. on technology policy, with the EU continuing to take a more aggressive regulatory stance toward American tech companies.

Lagarde's suggestion that AI could trigger a financial crisis, however, seemed exaggerated and unsupported.

In practice, Europe remains at war with U.S. technology companies and continues to plan to fine and tax these companies, so they have to run to President Trump for protection. 

Perhaps, unsurprisingly, the U.S. fired back, pulling the visas of the creators of the European Union's Digital Services Act so they can no longer visit the U.S., and indicating there will not be a détente anytime soon. 

Related: Navellier to SpaceX buyers: wait for escape velocity

NATO and Ukraine are points of contention between the U.S. and Europe, but their war on U.S. technology companies is brewing in the background. Ultimately, it will rear its ugly head again, especially as the AI trade evolves and companies and governments grapple with how to finance it. 

In Europe, The Hits Keep on Coming

The ECB's comments on AI are not the only example of Europe's questionable policy approach.

Most central bankers understand that monetary policy cannot directly control food and energy prices. Nevertheless, the ECB raised its key interest rate by 0.25% to 2.25% on June 11, while warning that "the outlook remains uncertain, with upside risks for inflation and downside risks for economic growth."

The ECB also said its rate increase left it "well positioned to navigate the uncertainty caused by the war."

The problem is that higher interest rates will not lower oil prices or fix Europe's energy challenges. Many European economies are already dealing with demographic decline and weakening consumption, yet the ECB is trying to further restrain demand with a rate hike that does little to address the real sources of inflation.

Key Takeaways

• ECB President Christine Lagarde warned that tokenized finance cannot scale without central bank money.

• Lagarde argued that private stablecoins lack the trust and flexibility needed for institutional adoption.

• The ECB believes central bank money is the only universally trusted and risk-free settlement asset, making it essential for large-scale tokenized financial markets.

European Central Bank (ECB) President Christine Lagarde has delivered a clear message to the digital asset industry: tokenized finance will not achieve mainstream adoption in Europe unless it is built on central bank money rather than private stablecoins.

Speaking at an ECB conference in Frankfurt, Lagarde argued that while tokenization and distributed ledger technology (DLT) offer significant benefits for financial markets, they require a risk-free settlement asset to scale beyond pilot projects and isolated ecosystems.

Her comments underscore a growing divergence between Europe's vision for digital finance and the global stablecoin market, which remains overwhelmingly dominated by US dollar-backed tokens.ù

Lagarde Questions Stablecoins' Role in Europe's Digital Economy

At the center of Lagarde's argument is the belief that stablecoins cannot provide the trust, liquidity, and flexibility needed to support large-scale tokenized financial markets.

According to the ECB president, market participants have repeatedly indicated that they are reluctant to issue digital assets at scale unless those assets can be settled in central bank money.

While stablecoins can facilitate transactions, Lagarde argued that they remain private claims backed by reserves, making them fundamentally different from central bank money, which is considered the safest and most universally accepted settlement asset.

"A token that is backed euro-for-euro can never do that," Lagarde said, referring to the ability of central bank money to expand and contract according to market liquidity needs.

Lagarde also highlighted the concentration of the global stablecoin market, noting that approximately 98% of stablecoins in circulation are denominated in US dollars.

Tether and Circle alone account for nearly 90% of the market, reinforcing concerns among European policymakers about reliance on foreign-controlled digital payment infrastructure.

In a notable shift, Lagarde suggested that promoting euro-denominated stablecoins may not be the most effective path forward for Europe.

Instead, the ECB appears increasingly focused on building public digital infrastructure capable of directly supporting tokenized finance.

(Adds bylines and tag)

By Charlie Devereux and Yoruk Bahceli

LONDON, June 16 (Reuters) - Europe must tap into trillions of euros of private savings to fund the economic transformation it needs to compete with ‌the U.S. and China, investors and policy makers said on Tuesday at a Reuters Next event.

"We ‌sit on €35 trillion ($40.7 trillion) of private savings, which is enough to make all of those transitions," said Benoit Peloille, chief investment officer at ​Natixis Wealth Management.

"We have to build enough confidence and stability to make sure that private savings don't stay on very low risk assets and go and finance all of those transitions," he added.

Former European Central Bank chief Mario Draghi warned in 2024 that the EU needed to better coordinate industrial policy, make quicker decisions and attract massive investment or ‌face a "slow agony" as the U.S. and ⁠China's more streamlined economies race ahead through innovation in AI.

There are signs of political momentum and that European policymakers have heeded Draghi's advice, said Alison Martin, chief executive officer ⁠for life, health and bank distribution at Zurich Insurance.

She cited initiatives such as the Digital Omnibus Agreement and the creation of savings and investment accounts as signs of the EU's willingness to deregulate and encourage investment.

"I think the next six ​months are ​going to really show us whether Europe will be stepping ​up," Martin said.

The EU has a long ‌way to go to catch up with the U.S. which has several competitive advantages including much cheaper energy prices, more flexible labour laws and a far faster rate of deployment of AI, said Nizar Trigui, chief technology officer at global logistics firm GXO.

BIGGER AND FASTER

The U.S. accounts for 55% of all the world's unicorns, or startup companies worth more than $1 billion, according to the UN's World Intellectual Property Organization. That includes Space X, which on Tuesday ‌became one of the world's five most valuable companies following its ​initial public offering last week.

Peloille said this was due to the ​U.S. being an easier environment in which to ​raise capital.

The scarcity of unicorns in Europe was "absolutely not acceptable" given the weight of ‌Europe in the world, he said.

Nadia Calviño, president ​of the European Investment Bank, ​agreed that the EU was on the right track but said it needed to "go bigger and faster."

She said initiatives such as the European Tech Champions Initiative had created a dozen unicorns since it was ​created by the EIB in 2023.

"European unicorns ‌do exist. Now we need them to get larger and to have more," Calviño said.

View the ​live broadcast of the World Stage here and read full coverage here.

($1 = 0.8607 euros)

(Reporting by Yoruk ​Bahceli; Writing by Charlie Devereux; Editing by Alexandra Hudson)