European Union (EU) policymakers are accelerating efforts to advance the adoption of the digital euro across eurozone, according to reports, following the recent passage of a US stablecoin law that heightened concerns about the competitiveness of European digital currency.
Earlier, the US Congress approved a landmark law on the $288 billion (€248 billion) stablecoin market, which is dollar-dominated, because of persistent lobbying from the cryptocurrency industry.
Stablecoins are a class of digital currency that is pegged one-to-one to sovereign currencies and is usually backed with reserves such as government bonds.
Sources added that authorities are now considering running the digital euro on a public blockchain such as Ethereum or Solana, rather than a private platform as initially expected, due to growing concerns around privacy.
The European Central Bank (ECB) has been exploring the creation of a digital version of the euro for several years.Plans are to enable the free use of digital euro across eurozone, and let citizens access central bank–backed payment methods as cash usage continues to decline, while promoting euro globally.
Concerns have grown that the American legislation would lead to the adoption of dollar-backed tokens in Europe. EU officials believe that only a strong digital euro can safeguard the euro’s role as the continent’s leading currency.
Piero Cipollone, a member of the ECB executive board, had already warned in April that the US promotion of dollar-based stablecoins “raise[s] concerns for Europe’s financial stability and strategic autonomy”. He cautioned that the shift might lead to “euro deposits being moved to the United States and in a further strengthening of the role of the dollar in cross-border payments”.
At present, several euro-denominated stablecoins exist, the largest operated by Circle with a market capitalization of $225 million. Yet, a central bank–issued token would solidify the EU’s commitment to digital assets.
If the project were to run on a public blockchain, the digital euro could be traded widely enhancing its adoption. However, officials remain cautious, as public blockchains make transaction records visible, which could raise privacy challenges.
The ECB confirmed that it continues to examine “different technologies — both centralised and decentralised — in the development of the digital euro, including distributed ledger technologies,” noting that no final decision has yet been taken.