European Union officials are fast-tracking plans for a digital euro in response to new U.S. legislation governing stablecoins, amid growing concern that dollar-backed tokens could undermine the competitiveness of the single currency, according to reporting from the Financial Times.
The U.S. Congress last month passed the so-called Genius Act, a landmark law regulating the $288 billion stablecoin market, which is currently dominated by dollar-pegged tokens. The move has rattled European policymakers, with one person involved in discussions saying it has prompted officials to “rethink plans for the digital euro” and accelerate timelines.
The European Central Bank (ECB) has been exploring a central bank digital currency (CBDC) for several years, presenting it as a secure, public form of money that could be used across the Eurozone. Supporters argue that a digital euro would provide an alternative as cash usage declines while bolstering the euro’s role in global finance.
But the swift passage of U.S. legislation has intensified fears that euro deposits could increasingly shift to the U.S., strengthening the dollar’s grip on cross-border payments. “Let’s speed up, let’s push,” said one person familiar with EU discussions.
In a potential shift, officials are now debating whether to launch the digital euro on a public blockchain such as Ethereum or Solana, rather than on a private, centralised system, as previously expected. Running the digital euro on a public chain could allow for broader circulation and global usage, but it raises privacy concerns given that most blockchain transactions are visible.
Piero Cipollone, a member of the ECB’s executive board, warned in April that Washington’s backing of dollar-denominated stablecoins posed risks to “Europe’s financial stability and strategic autonomy,” cautioning that it could accelerate capital flight from euro deposits to U.S. assets.
The stablecoin market is currently dominated by U.S. companies including Circle and Tether, while banks like JPMorgan and Citi are also exploring dollar-backed digital assets. Circle has launched a euro-denominated stablecoin with a market capitalization of around $225 million, but a digital euro directly issued by the ECB would significantly raise the region’s commitment to digital money.
“Europe cannot afford to rely excessively on foreign payment solutions,” Cipollone said.
While no final decision has been made, the ECB confirmed to the Financial Times that it is evaluating “different technologies — both centralised and decentralised — in the development of the digital euro, including distributed ledger technologies.”
