Could a Consortium of European Banks Solve the Euro Stablecoin Problem?
Consortium governance will decide whether European banks can build a viable euro stablecoin
The announcement that major US banks including JPMorgan Chase, Bank of America, and Citigroup are exploring a joint stablecoin venture signals a fundamental shift in traditional banking's approach to digital assets. At the same time, stablecoin giant Circle—issuer of USDC and EURC—is pushing to become a bank, further blurring the line between fintech and traditional finance.
For European banks, these moves should serve as both a blueprint and a wake-up call. Should they form their own consortium? And if so, what are the challenges in building one that actually works?
As we've documented in previous editions of Euro Stable Watch, euro stablecoins command less than 1% of the $250 billion global market despite the euro representing 20% of foreign exchange reserves. This failure stems not from technical limitations but from structural disadvantages that a consortium formation could address. Yet banking consortiums carry their own risks, often failing due to competing interests and bureaucratic governance that strangles innovation at birth.
Why European Banks Need Each Other
The fragmented nature of European banking makes individual action particularly challenging. Unlike the unified US market, European institutions must navigate different regulatory frameworks across member states whilst competing for market share in a continent where SEPA already provides instant transfers. The traditional stablecoin value proposition—settlement speed and currency stability—offers little appeal to European consumers who already enjoy both.
A consortium approach could pool resources to overcome the structural disadvantages we've previously identified. MiCA's reserve composition rules, requiring 60% of backing in low-yield bank deposits versus 90% in higher-yield instruments for US competitors, create a permanent revenue disadvantage. On a €1 billion stablecoin, this means €30–40 million less annual revenue compared to Circle or Tether. Individual European banks and fintech companies cannot overcome this arithmetic alone, but collective action could create sufficient scale to absorb these costs. Together, European banks serve over 500 million customers and command deep liquidity—giving them the power to make a stablecoin work if they act in concert.
The fragmentation of European sovereign debt markets compounds these challenges. Where US stablecoin issuers can back tokens with unified Treasury bills, European alternatives must navigate German bunds, French OATs, Italian BTPs, and other instruments with varying risk profiles. A consortium of major European banks—Deutsche Bank, BNP Paribas, Santander, ING—could create the operational complexity needed to manage this fragmentation professionally.
More fundamentally, European banks face a timing problem that has long held back the continent’s digital innovation. As we noted in our analysis of MiCA’s reactive nature, Europe tends to regulate only after American firms have already shaped the market. Stablecoins are a clear example: while MiCA was in development for six years, Tether grew from $20 billion to $150 billion, and Circle expanded USDC from near zero to $60 billion. Although Circle has launched EURC, both it and Tether remain overwhelmingly focused on dollar-denominated stablecoins. As a result, the lock-in effects now work in two ways: they reinforce the dominance of these US firms, and they entrench the dollar’s position in the global digital asset ecosystem—at the expense of the euro. Even if better positioned to address those challenges, a European banking consortium may still struggle to overcome these combined advantages.
The Governance Challenge
The key factor in a bank consortium’s success will not be technology, regulatory approval, or even reserve management. It will be governance. Such consortiums have a mixed track record, often failing because competing institutional interests create bureaucratic decision-making that prevents startups from moving at startup speed.
Having led or worked with digital banking initiatives within traditional institutions, we learned that success requires genuine operational independence whilst maintaining strategic backing. The venture needs to operate like a proper startup: fast decision-making, dedicated resources, and freedom to innovate without constant committee approvals from parent institutions whose quarterly pressures and competing priorities often conflict with long-term digital innovation.
Three governance principles prove essential for any consortium approach:
Ring-fenced Resources: The venture must have its own dedicated budget and team, protected from parent banks' quarterly pressures. Shared resources inevitably mean shared delays as competing priorities within member institutions override digital currency development.
Technology Independence: Building on existing bank infrastructure might appear efficient, but creates dependencies that slow innovation. The stablecoin venture needs its own technology stack, able to integrate with bank systems where beneficial but not constrained by legacy architecture that carries decades of compliance requirements designed for different business models.
Startup Autonomy: The venture must operate with startup-like independence in daily operations whilst leveraging banking expertise strategically. This means having its own management team with decision-making authority, not a committee of bank representatives whose primary loyalty remains to their individual institutions.
These requirements emerge from practical experience. They reflect the difference between digital banking initiatives that succeed and those that become expensive experiments in institutional politics.
Learning from Air Travel: The Amadeus Model
European banking can learn from a successful consortium model in air travel: Amadeus. Created in 1987 as a joint venture by Air France, Lufthansa, Iberia, and SAS to develop a global distribution system for airline reservations, Amadeus demonstrates how competing companies can collaborate successfully on infrastructure that serves the entire industry.
Amadeus succeeded because its governance structure prioritised independence over control. Whilst backed by major airlines, it operated independently with its own management team and clear commercial objectives. The founding airlines provided strategic direction and guaranteed initial business but didn't micromanage operations. This independence allowed Amadeus to serve not just founding members but the entire air travel industry, creating revenue streams that pure internal solutions could never achieve.
Most importantly, Amadeus was designed from the beginning for eventual independence. In 1999, it went public, with founding airlines gradually reducing their stakes. Today, Amadeus operates as a €25 billion technology company serving the global travel industry—a success story of consortium-to-independence that European banks could emulate.
The parallel extends beyond governance. Like stablecoins, airline reservation systems required industry-wide adoption to achieve network effects. Individual airlines couldn't create sufficient liquidity alone, but collaborative infrastructure enabled the entire sector to digitise efficiently. The founding airlines captured value not through direct ownership but through improved operational efficiency and market access that the shared platform provided.
A Blueprint for European Success
A European stablecoin consortium should follow a similar evolution path:
Phase 1: Consortium Formation. Major European banks form a joint venture with shared ownership but independent management. Unlike traditional banking partnerships that maintain institutional control, this structure prioritises operational independence from day one.
Phase 2: Operational Independence. The venture operates as a standalone entity with its own technology, team, and commercial strategy whilst leveraging bank backing for credibility and regulatory relationships. Parent institutions provide funding and strategic guidance but avoid operational interference.
Phase 3: Market Expansion. Once the stablecoin is established and trusted, it can serve not only consortium members but the wider European market—and potentially expand globally. At this stage, revenue streams grow beyond internal use to include third-party adoption and integration. Crucially, this phase also gives individual banks the flexibility to build their own products on top of the shared infrastructure, allowing them to differentiate where it makes sense, while still benefiting from the stability and scale of the consortium.
Phase 4: Strategic Independence. Following the Amadeus model, the venture could eventually IPO, allowing founding banks to realise returns whilst creating truly independent European digital currency infrastructure that competes globally without institutional constraints.
This progression addresses the fundamental tension in consortium governance: the need for member commitment without member control. Banks provide the initial credibility and resources, but success depends on transcending their individual limitations.
The Timing Window
The regulatory environment in Europe increasingly favours such ventures. MiCA provides a clearer framework for stablecoin issuance than existed when Tether and Circle achieved dominance, whilst the ECB's work on a digital euro creates policy momentum around digital currency infrastructure. European banks have the regulatory clarity that their American counterparts built without.
The competitive threat grows more urgent. US banks moving into stablecoins, combined with the dominance of US dollar-denominated tokens, risks marginalising the euro in digital economy development. Secretary Scott Bessent's projection of a $3.7 trillion stablecoin market, as we analysed in our recent edition on dollar hegemony, represents massive Treasury demand that extends American monetary influence globally. Every day European banks delay consortium formation, this digital dollarisation deepens.
Yet timing alone won't ensure success. The window exists, but only for properly structured initiatives that learn from past consortium failures whilst adapting to stablecoin market realities.
Avoiding Common Pitfalls
European banks considering consortium formation must avoid typical banking partnership pitfalls that have undermined previous collaborative efforts:
Committee-driven governance that slows decision-making to the pace of the most cautious member rather than market requirements.
Shared technology platforms that create technical dependencies and force compromises between incompatible institutional systems.
Rotating leadership that prevents consistent strategy execution as different banks prioritise different objectives during their terms.
Equal representation that prioritises institutional politics over market performance and customer needs.
Instead, they should create structures that combine the credibility and resources of traditional banking with the agility and focus of technology startups. This means accepting that success requires ceding operational control to independent management whilst maintaining strategic influence through board participation and performance metrics.
The Distribution Challenge
Even well-governed consortiums face the distribution challenge that individual banks cannot solve alone. As we detailed in our analysis of retail-led adoption models, euro stablecoins need business models suited to European conditions rather than attempting to replicate Tether's reserve-yield approach under MiCA's constraints.
The consortium structure could enable distribution partnerships that individual banks couldn't achieve. Rather than competing for the same European customers, member banks could coordinate on broader market development whilst maintaining competition in traditional banking services. This approach mirrors how Amadeus enabled airline cooperation on infrastructure whilst preserving competition on routes and services.
Major European retailers represent the most promising distribution channel, offering existing customer relationships and reasons to use tokens beyond crypto speculation. A consortium of European banks could provide the regulatory compliance and technical infrastructure that Amazon, Zalando, or other major retailers need to implement branded euro stablecoins for their European operations.
The consortium model offers particular advantages for retail partnerships. Individual banks might struggle to provide the scale and technical resources that major retailers require, whilst retailers might hesitate to depend on single banking relationships for digital currency infrastructure. A consortium could provide redundancy, shared development costs, and collective expertise that makes retail partnerships more attractive to both sides.
Beyond Reserve Yields
Success requires abandoning the traditional stablecoin revenue model entirely. As we've documented, European institutions cannot compete on reserve yields when starting with structural disadvantages. The consortium must develop revenue streams that don't depend on interest rate arbitrage but rather on transaction volume, data value, and programmable money capabilities.
This shift requires thinking beyond banking business models towards platform economics. The consortium succeeds not by earning spreads on reserves but by enabling economic activity that generates fees, data insights, and network effects. Amazon's potential EURA token, backed by consortium infrastructure, could process €10+ billion annually whilst providing rich behavioural data about European consumer preferences and cross-border commerce patterns.
The platform approach also addresses the sovereignty concerns that motivate European policy interest in digital currency alternatives. Rather than depending on Circle's American infrastructure or Tether's offshore operations, European businesses and consumers could access programmable money infrastructure controlled by European institutions operating under European regulation.
The Strategic Choice
The US bank stablecoin initiative demonstrates that major financial institutions now view digital currencies as essential infrastructure rather than experimental technology. European banks have the regulatory framework through MiCA and the technical capabilities to build competitive alternatives. Success depends on governance structures that enable speed and innovation whilst maintaining institutional credibility.
The Amadeus model provides a proven template. Airlines that competed fiercely on routes and pricing collaborated effectively on reservation infrastructure because they structured the venture for independence rather than control. The consortium succeeded by serving the entire industry, not just founding members, creating revenue streams that individual solutions could never achieve.
European banks can apply these lessons to stablecoin development. Proper consortium structure could overcome the individual disadvantages that MiCA's requirements create whilst building the scale needed to compete with established dollar-denominated alternatives. The alternative—continued individual action—leaves European institutions dependent on American or offshore infrastructure for digital currency capabilities.
Implementation will determine whether European banks capture meaningful positions in programmable money or accept marginalisation in digital finance development. The infrastructure being built now will shape payment systems for the next decade.
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👋 About Us | We advise firms—including banks and infrastructure providers—operating in the stablecoin and digital asset space. Some of this work is subject to confidentiality agreements, so we cannot name clients or disclose details. We keep a clear line between our advisory work and editorial output, and we avoid publishing material that would create a direct conflict of interest. Nothing in this publication should be taken as investment advice. We also take part in private briefings, board sessions, and public speaking engagements across the sector. Some of these are paid.
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