Digital euros and liquidity backstops won't dent dollar dominance, says Fed's Miran
European officials may be warming to the idea of using euro stablecoins as a way to challenge the dollar, but Stephen Miran says the greenback isn’t going anywhere.
Federal Reserve Governor Stephen Miran downplayed the idea that Europe can chip away at dollar dominance by embracing digital euros or euro-pegged stablecoins, noting the dollar’s dominance rests on deeper structural foundations.
“I think the dollar will remain structurally dominant against those challengers. I don’t see any realistic competitors to the dollar,” Miran told The Peg in an interview on Wednesday.
His remarks come as European officials — many of whom are seeking to reduce reliance on U.S. payment providers — debate whether stablecoins pose a risk to euro stability or could, if issued in euros, help support the currency’s internationalisation.
Many policymakers — including European Central Bank President Christine Lagarde — argue that the launch of the digital euro will help to strengthen the currency’s role in international reserves, chiefly by improving cross-border euro payments.
But most officials feel very differently about stablecoins. More than 99 percent of global supply is denominated in U.S. dollars and concerns are rife that widespread adoption could expose the eurozone to dollarisation, undermining the currency union’s monetary sovereignty.
However, in a sign that the mood may finally be shifting, Bundesbank President Joachim Nagel said in a speech last week that the eurosystem should consider supporting “DLT-based payment instruments not directly related to central bank money”. This would include both tokenised deposits and euro-denominated stablecoins. On Monday, he added there may be “merit in euro-denominated stablecoins” if they enable low-cost cross-border payments for households and businesses.
This evolving stance comes as the ECB announced on Saturday that it would extend backstop euro liquidity to all non-euro area central banks, apart from those excluded on grounds of money laundering, terrorist financing, or breaches of international sanctions
Miran, however, suggested that such initiatives misunderstand what underpins reserve currency status.
“If you think about being an international currency, you want to be convertible, you want to be deep, you want to be liquid, and you also want to be a growing share of global GDP,” he said. “I see a lot of reasons for expecting U.S. economic growth to continue diverging to the upside versus global GDP growth.”
