ECB Report: A Financial World in Fragmentation

The European Central Bank's annual report on the international role of the euro conveys the message that the global monetary order is entering a phase in which geopolitical considerations are beginning to matter almost as much as economic fundamentals.

According to the ECB, the international use of the euro increased in 2025, albeit only moderately. The composite indicator developed by the institution shows that the euro accounts for approximately 20% of the global use of major international currencies, firmly maintaining its position as the world's second most important currency after the U.S. dollar.

However, nearly every chapter of the report is permeated by the same theme: geopolitical fragmentation.

• Gold Has Not Defeated the Dollar

The report's most widely publicized conclusion is that, by the end of 2025, gold represented approximately 27% of total global official reserves, surpassing both the euro (15%) and U.S. Treasury securities (22%).

Nevertheless, the ECB explicitly warns that this conclusion may be misleading.

The report's authors note that the price of gold rose by approximately 60% in 2025 and by a further 30% in 2024. This appreciation mechanically increased gold's share of global reserves.

If gold were valued at end-2023 prices, gold and the euro would each account for approximately 16% of global reserves, while U.S. government securities would remain by far the largest reserve asset, representing around 26%.

The ECB is therefore not describing a collapse of the dollar, but rather the effects of a spectacular revaluation of gold.

• The Dollar Continues to Dominate the Monetary System

Data presented by the ECB show that the U.S. dollar maintains approximately 57% of global foreign-exchange reserves, a proportion virtually unchanged from the previous year. At the same time, the euro remains around the 20% mark, while the Chinese yuan is stagnating near 2%.

This stability leads the report's authors to conclude that reserve managers continue to avoid abrupt portfolio shifts, even in an increasingly tense geopolitical environment.

Consequently, the ECB does not identify an accelerated process of de-dollarization, but rather a cautious diversification of reserve holdings.

• Wars Have Returned Gold to the Center of Attention

The report emphasizes the link between geopolitics and gold demand.

According to the ECB, central-bank gold purchases remained close to 850 tonnes in 2025, below the record levels observed between 2022 and 2024, yet still far above historical averages.

More important, however, is the distribution of buyers.

The ECB observes that the countries purchasing the largest quantities of gold tend to be located in regions exposed to elevated risks of external conflict.

Since Russia's invasion of Ukraine in 2022, China has purchased more than 350 tonnes of gold, Poland approximately 320 tonnes, Turkey around 220 tonnes, and India roughly 130 tonnes.

The authors conclude that gold is increasingly being used as a hedge against geopolitical risks rather than merely as a diversification asset.

• The Euro Is Beginning to Be Viewed as a Safe-Haven Currency

One of the ECB's most interesting observations concerns the behavior of the euro during periods of financial stress.

The institution notes that during several episodes of heightened risk aversion in 2025 and early 2026, the euro appreciated alongside the Swiss franc and the Japanese yen.

By contrast, the U.S. dollar weakened while yields on U.S. government bonds rose simultaneously-a combination considered unusual during periods of financial flight to safety.

For the ECB, this constitutes a signal that investors are beginning to regard the euro as a credible alternative during times of uncertainty.

• Europe Benefits from the Artificial Intelligence Investment Boom

The chapter on international financing highlights a remarkable development.

According to the ECB, international bond and loan issuance denominated in euros exceeded $1.1 trillion in 2025, the highest level in the history of the European currency.

The institution attributes this phenomenon to three factors:

- favorable financing costs in euros;

- attractive yield differentials compared with other currencies;

- the explosion of investment in artificial intelligence.

The ECB even provides concrete examples.

Alphabet issued approximately euro13 billion in euro-denominated bonds to finance AI infrastructure in Europe, while Amazon completed a record euro14.5 billion bond issuance during the first quarter of 2026 for similar investments.

• The Yuan Is Advancing in Payments and Trade, Not in Reserves

The report describes an important distinction between the Chinese currency's financial role and its commercial role.

In foreign-exchange reserves, the yuan remains close to 2%, according to ECB data.

By contrast, its share of global foreign-exchange transactions has increased to approximately 9%, while in international trade finance it has already surpassed the euro, accounting for roughly 8% of SWIFT trade-finance messages.

For the ECB, this reflects China's expanding commercial influence and Beijing's efforts to build alternative international payment infrastructures.

• Stablecoins Are Becoming a Systemic Factor

A substantial section of the report is devoted to stablecoins.

The ECB estimates that the global stablecoin market exceeded $300 billion by the end of 2025, approximately 50% larger than the previous year.

The institution warns that a massive expansion of this sector could alter the transmission of monetary policy across economies and amplify international financial shocks.

The ECB's message is clear: stablecoins are no longer viewed as a marginal phenomenon of the crypto market, but as a potential component of the global monetary architecture.

• Conclusion of the Report

The report describes a world in which the dollar remains dominant, the euro is gradually strengthening its position, and gold together with new payment infrastructures are gaining importance amid growing geopolitical tensions.

The central message is neither the rise of gold nor the decline of the dollar.

Rather, it is that the management of international reserves is increasingly being influenced by geopolitical security considerations, while the global monetary system is becoming more fragmented and more multipolar than it was in previous decades.