The Unspoken Bretton Woods
Europe’s last chance to shape global money
A battle for monetary supremacy is unfolding in real time, yet few in Europe grasp its significance. While European authorities debate regulatory frameworks, the US and China are actively reshaping the global financial landscape with radically different strategies. The stakes could not be higher: whoever controls the new money stack will define the economic order of the next century.
🇺🇸 The American Play: Stablecoins as Sovereign Strategy
As we noted in June, one reading of the Trump administration’s proactive stance on stablecoins is a sophisticated understanding of how stablecoins and other crypto assets, like Bitcoin, can extend dollar hegemony. From an American perspective, the best way to maintain monetary dominance is not to fight digital currencies but to ensure they remain fundamentally tied to dollar infrastructure.
Consider Tether’s evolution from a simple stablecoin issuer into a far more influential player. The company now holds $135 billion in US Treasuries, making it the 17th largest holder globally—ahead of South Korea. With projected profits of $15 billion this year, Tether has become a conglomerate that amongst many different activities owns gold mines, operates Bitcoin mining facilities, and invests strategically across the crypto ecosystem.
Here’s the flywheel at play: Tether mints USDT, backing it primarily with Treasuries and very liquid assets (90%) and some Bitcoin and gold (10%). The yield from those Treasuries is mostly straight profit—roughly $8–9 billion annually at current rates—is reinvested into hard assets like gold and Bitcoin, along with mining operations and strategic investments in areas such as AI. As these assets appreciate, Tether’s capital base grows, enabling more USDT issuance, which drives further Treasury purchases, generating additional yield for reinvestment.
This creates a self-reinforcing demand machine for US government debt. Every USDT minted creates fresh Treasury demand. Every Treasury purchased produces yield that strengthens the system. Each strengthening of the system supports further USDT creation. The effort might appear to challenge dollar dominance, but as Tether CEO Paolo Ardoino noted on the Odd Lots podcast back in April, actually reinforces it.
The GENIUS Act, signed into law in July, accelerates this dynamic by providing regulatory clarity that encourages stablecoin growth. Banks such as JPMorgan, Citi, and Bank of America are exploring their own stablecoin ventures, while Erebor—backed by Peter Thiel and Palmer Luckey—positions itself as a “stablecoin bank” explicitly designed to support American industrial exports.
Secretary Scott Bessent’s projection of a $3.7 trillion stablecoin market reveals the fiscal math at work. If even half of that requires Treasury backing, it represents $1.8 trillion in guaranteed demand for US government debt—enough to absorb years of deficit spending without relying on foreign central banks. The stablecoin revolution becomes a backdoor mechanism for funding American fiscal expansion while cementing the dollar’s global role.
Trump himself doesn’t shy from making splashy comments about it—which, to an extent, deserve to be taken seriously. Consider, for instance: “Maybe we‘ll pay off the $35 trillion U.S. debt in crypto” (September 2024), “Crypto’s gonna make a lot of money for the country” (March 2025), or “Bitcoin takes a lot of pressure off the dollar” (June 2025).
🇨🇳 China’s Counter-Strategy: The Investment Platform as Monetary Weapon
China’s response reflects decades of strategic patience and a recognition that the present moment offers a rare opportunity. The 15th Five-Year Plan, released amid fanfare over technological self-sufficiency and common prosperity, contains something more fundamental: a blueprint for monetary reorganisation on a continental scale.
Beijing’s approach contrasts sharply with Washington’s crypto enthusiasm. The plan promotes RMB internationalisation through traditional mechanisms—capital account openness, cross-border payment systems, and gradual two-way opening of financial markets. Stablecoins and Bitcoin do not appear in official documents.
Instead, China is pursuing two interlocking strategies with potentially transformative implications. First, it is opening capital markets to foreign investment as US asset valuations reach historic highs. Second, it is quietly laying the foundations for what could become the largest monetary zone in history.
The valuation gap between US and Chinese tech assets remains striking. Nvidia trades at $5 trillion, while Chinese firms of comparable scale and growth trade at fractions of that value. Tencent, dominant in digital payments through WeChat, is valued at $740 billion versus Meta’s $1.9 trillion. Baidu sits at $44 billion compared with Google’s $3 trillion. Chinese tech valuations have been deliberately suppressed through regulatory crackdowns and capital controls, creating significant investment opportunities. Now, as US markets reach bubble territory, Beijing is slowly opening the gates: the Shanghai Stock Exchange announces new foreign investment channels, Hong Kong relaxes ownership restrictions, and China’s central bank, the People’s Bank of China, openly discusses capital account liberalisation.
Foreign investors, seeking returns amid overvalued US assets and low European yields, are responding. BlackRock’s China‑joint‑venture saw assets nearly double to CNY 51.3 billion in 2025. Goldman Sachs expands in Shanghai. European pension funds quietly build positions in Chinese equities. Capital flows east, supported by recent trade agreements that lend the RMB legitimacy as a reserve asset.
Simultaneously, China is nudging regional monetary integration forward. Its trade dominance in ASEAN and Central Asia, combined with supply of critical technology and manufactured goods, strengthens a regional system in which the RMB plays an increasingly central role. India’s tentative involvement illustrates China’s strategic patience. Despite decades of rivalry and ongoing border disputes, India has been drawn in gradually through economic necessity—its imports of Russian oil increasingly settled in yuan and rupees bypass Western systems. A closer China-India alignment remains a long shot, but the trend is worth watching.
This regional zone could eventually encompass nearly half the world’s population and a third of global GDP. Hong Kong is central to this architecture. Its currency peg to the dollar offers a bridge between systems, while its regulatory alignment with Beijing ensures political control. The city is experiencing a financial renaissance: IPO activity is surging, trading volumes are hitting record highs, and it has regained status as a hub for global capital. Hong Kong’s infrastructure positions it as a testbed for modern monetary statecraft in Asia. Its upcoming stablecoin licences will make it a proving ground for digital currency experimentation, demonstrating how offshore digital assets can operate within Chinese capital controls while supporting broader RMB internationalisation.
Hong Kong is not free from risk. Geopolitical tensions, the impact of mainland economic cycles, and lingering political uncertainty make its trajectory uneven. Yet the city’s revival demonstrates Beijing’s ability to blend control and innovation, positioning Hong Kong as both a laboratory and a showcase for Asia-style financial evolution.
🇪🇺 Europe’s Strategic Paralysis: The Cost of Indecision
Europe’s response to this monetary reshaping reveals an institution caught between ambition and paralysis. The European Central Bank speaks forcefully about monetary sovereignty and the euro’s international role, yet its actions suggest confusion about what those concepts mean in a digital age.
Christine Lagarde’s recent appearance before the European Council captured this perfectly. She acknowledged that a new financial architecture is emerging”and that Europe must secure its position, yet when pressed for specifics, she offered only process: more studies, further consultations, enhanced coordination between already-coordinated institutions, and a promise that a digital euro will be ready… by 2029, when the game may already be over.
The European Systemic Risk Board’s (ESRB) recent report on stablecoins exemplifies Europe’s defensive posture. Rather than exploring how euro stablecoins could extend European monetary influence, the report focuses exclusively on risks: bank disintermediation, monetary policy transmission, financial stability concerns. Every paragraph emphasises fear of innovation over opportunity.
This caution might be understandable if Europe were starting from weakness. Yet Europe possesses advantages neither America nor China can match. MiCA provides the world’s first comprehensive stablecoin regulatory framework—passed before the GENIUS Act, though largely unnoticed. The ECB runs one of the most sophisticated monetary systems globally, backed by centuries of central banking expertise. European capital markets, though fragmented, contain enormous wealth seeking productive deployment.
Yet these advantages atrophy through disuse. While Europe drafted MiCA’s 400 pages, Tether grew from $20 billion to $135 billion. While the ECB debated wholesale versus retail CBDCs, Circle launched USDC and captured the regulated stablecoin market. While European Parliament committees debated digital euro privacy, China built cross-border payment systems encompassing half of Asia.
Euro-denominated stablecoins now represent less than 1% of the global market, despite the euro comprising 20% of foreign exchange reserves. European exchanges have delisted major stablecoins rather than competing with them. Société Générale’s EUR CoinVertible, launched as Europe’s answer to USDC, has achieved minimal traction. Monerium, which obtained an electronic money licence in 2019—before most competitors even existed—remains a niche player.
Europe treats money as something to be protected rather than projected. Every policy document stresses safeguards, controls, and restrictions. The notion that euro stablecoins could become instruments of European power—the monetary equivalent of Airbus or ASML—rarely appears in official discourse.
This defensive stance is ultimately self-defeating. By focusing on preventing hypothetical risks, Europe guarantees actual irrelevance. The global financial system will not wait for committees to reach consensus. Every month of delay allows dollar stablecoins to penetrate deeper into global commerce, while China’s monetary zone expands across Asia.
The Infrastructure Battle: Who Controls the Rails
Beneath the currency competition lies a deeper battle over financial infrastructure that will shape how money moves for generations. The traditional system—SWIFT messages, correspondent banking, multi-day settlement—faces existential pressure from three directions.
The American approach leverages private innovation to rebuild infrastructure at internet speed. Stripe’s $1.1 billion acquisition of Bridge signals that payment companies see stablecoins not as curiosities but as core infrastructure. Circle’s launch of its own blockchain, Arc, shows ambitions beyond token issuance, aiming to control the full stack. Google’s revival of its GCUL blockchain project suggests that Big Tech sees financial infrastructure as the next platform battle.
These moves indicate coordinated transformation. When major US banks explore stablecoin issuance, payment processors integrate blockchain settlement, and tech giants build financial protocols, the result is wholesale infrastructure replacement. Not every American official shares this view, but a small, determined group is clearly working not to reform the old system but to bypass it entirely, all while still consolidating the dollar in the process!
Meanwhile, China’s strategy reflects its state-led model. Rather than fostering private innovation, Beijing builds official alternatives to Western systems. The Cross-Border Interbank Payment System (CIPS) now handles over 80 trillion yuan annually. The mBridge project links central banks across Asia and the Middle East for direct CBDC settlement. Digital yuan pilots involve hundreds of millions of users and billions in transaction volume.
This infrastructure serves political as well as economic purposes. Every transaction flowing through Chinese-built systems rather than SWIFT erodes Western financial surveillance capabilities. Sanctioned countries, starting with Russia and Iran, can still trade. Nations concerned about dollar weaponisation find alternatives. The infrastructure itself becomes a tool of diplomatic influence—all backed by a Chinese state that now matches US Treasury yields in the dollar bond market.
Europe, by contrast, remains hampered by familiar paralysis. The European Payments Initiative, intended to create a continental payment system, struggles against national interests and incumbent resistance. TARGET2, the ECB’s settlement system, is efficient but lacks the programmability blockchain enables. European banks participate in both SWIFT and emerging blockchain systems without fully committing to either.
Infrastructure matters because networks create lock-in effects that last decades. Once supply chains adapt to stablecoin settlement, trade finance moves to blockchain rails, and treasury systems integrate smart contracts, reversal becomes nearly impossible. The networks being built today will process quadrillions in value over the coming decades.
The Sovereignty Paradox: Independence Through Integration
The deeper tragedy of Europe’s paralysis lies in misunderstanding what monetary sovereignty means in an interconnected world. European policymakers speak of sovereignty as if it requires isolation—protecting the euro from foreign influence, controlling monetary transmission, and preventing capital flight. But true sovereignty in the networked, programmable 21st century comes from being too essential to exclude.
The US demonstrates this principle. Dollar dominance is maintained not through isolation but through integration so complete that global commerce cannot function without it. Every Treasury-backed stablecoin, every commodity priced in dollars, every trade invoice denominated in USD strengthens American monetary sovereignty by making alternatives unthinkable.
China grasps the same paradox. By opening capital markets while retaining political control, by building payment systems others rely upon, and by creating trade relationships that require RMB settlement, Beijing constructs sovereignty through indispensability. The RMB does not need to replace the dollar globally—it only needs to become irreplaceable regionally.
Europe could exploit its unique position between American innovation and Chinese state capacity. The euro could become the trusted neutral currency for those wary of both dollar surveillance and Chinese political influence. Euro stablecoins could deliver stability emerging market currencies lack, without the geopolitical baggage of alternatives.
But this would require embracing what Europe currently fears: widespread euro internationalisation via digital channels. Every euro stablecoin circulating in Africa represents European monetary influence. Every smart contract denominated in euros extends European legal frameworks. Every cross-border payment settled in digital euros strengthens European infrastructure.
The Three-Layer Solution: Europe’s Path Forward
Europe possesses the elements needed for monetary renewal—it lacks only the will to assemble them. A coherent strategy would recognise that different forms of digital money serve different purposes, and that trying to choose one over another guarantees failure.
Foundation layer—A wholesale CBDC would provide the settlement infrastructure euro stablecoins desperately need. Unlike fragmented sovereign bond markets, which complicate euro stablecoin backing, a wholesale CBDC would offer unified, risk-free collateral. This empowers the entire market with better tools.
Middle layer—tokenised deposits—commercial bank money on blockchain rails. European banks could offer programmable money services to corporate clients, enabling automated supply chain finance, instant cross-border payments, and smart contract integration. This preserves the traditional banking model while modernising its technical implementation.
Top layer—Freely competing euro stablecoins serving different market segments. Some might focus on retail payments, others on DeFi integration, and others on emerging market distribution. Competition drives innovation while regulation ensures stability.
This architecture acknowledges that Europe cannot win by copying American or Chinese models. The US benefits from structural advantages—unified Treasury markets, global dollar dependence, and a risk-taking culture—that Europe cannot replicate. China operates with political centralisation and strategic patience that European democracy precludes.
Europe must play to its own strengths: regulatory sophistication, institutional stability, and political neutrality. A well-designed euro digital currency stack could offer what neither the dollar nor the RMB provides: monetary stability without surveillance, innovation without chaos, integration without domination.
The Window Closes: 2025 as an Inflection Point
The luxury of deliberation has expired. Every month, dollar stablecoins penetrate deeper into global commerce. Every quarter, new Chinese financial infrastructure comes online. Every year of European hesitation between now and 2029 makes eventual action harder.
By 2027, current trajectories suggest a transformed landscape. Dollar stablecoins could reach $3 trillion in circulation, creating Treasury demand that locks in dollar dominance for generations. China’s monetary zone could encompass most of Asia, with RMB settlement becoming de facto mandatory for regional trade. Europe would then face a binary choice: accept junior partnership in someone else’s system or suffer monetary marginalisation.
Put another way: the infrastructure being built today—blockchain protocols, smart contract standards, interoperability layers—will define financial architecture for decades. Once network effects crystallise, once technical standards lock in, once business processes adapt, change becomes exponentially harder. The internet protocols defined in the 1970s still govern digital communication today. The financial protocols being written now will similarly endure.
Europe stands at a final decision point. The tools exist—MiCA provides a regulatory framework, TARGET2 offers settlement infrastructure, European banks have the technical capability. The need is clear—monetary sovereignty requires digital presence, economic competitiveness demands modern infrastructure, and geopolitical relevance hinges on financial innovation.
What is missing is recognition that this is an existential choice, not a technical detail. The unspoken Bretton Woods being written in code and commerce will determine whether Europe remains a monetary power or becomes a monetary museum.
The battle for currency and influence will proceed with or without European participation. The only question is whether Europe will help write the rules—or simply live under the rules others create. That choice must be made now, before the luxury of choice itself disappears.
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