European Union officials are pushing ahead with plans for a digital euro after the United States passed a new law regulating stablecoins. The move has caused concern in Brussels about the competitiveness of the euro in a fast-changing digital payments market.
Last month, the US Congress approved the Genius Act, a law designed to regulate the $288bn stablecoin sector, which is dominated by dollar-backed tokens. Stablecoins are cryptocurrencies tied to traditional currencies, such as the dollar or euro, and backed by reserves like government bonds.
According to people familiar with the matter, the quick passage of the Genius Act has “rattled a lot of people” in Europe. EU officials are now revisiting earlier plans and considering running the digital euro on a public blockchain, such as Ethereum or Solana, instead of a private one. Privacy concerns had initially made the European Central Bank (ECB) cautious about using public blockchain systems.
The Push for a Digital Euro
The ECB has been studying the possibility of launching a digital euro for several years. The aim is to create a free-to-use payment system across the Eurozone that can adapt to falling cash usage and help promote the euro globally.
Supporters believe a digital euro would provide Europeans with a central bank–backed alternative to commercial payment systems while strengthening the single currency’s role in international finance.
But the growing influence of dollar-backed stablecoins, supported by the US government, has raised alarm. EU officials worry this trend could weaken the euro’s position if European users and institutions increasingly adopt dollar-based tokens.
Piero Cipollone, an ECB executive board member, warned in April that the rise of US stablecoins could lead to “euro deposits being moved to the United States” and a further expansion of the dollar’s role in cross-border payments. He added that “Europe cannot afford to rely excessively on foreign payment solutions.”
Dollar Stablecoins Dominate, Euro Response Lags
Companies such as Circle and Tether currently dominate the dollar stablecoin market, while large US banks like Citi and JPMorgan Chase are exploring their own offerings. Meanwhile, Circle has launched the biggest euro-denominated stablecoin, but its market capitalisation remains at $225mn — a fraction of the dollar market.
China is seen as the global leader in central bank digital currency development, with its digital yuan already in circulation. The UK is also exploring a digital pound. For Europe, a digital euro could mark a decisive step in protecting its financial stability and sovereignty in a digital-first era.
Balancing Public Access and Privacy
If built on a public blockchain, the digital euro could circulate more widely and be used across borders. However, European officials remain cautious about transparency risks, as public blockchains record all transactions. Ensuring privacy for citizens while maintaining regulatory oversight will be a central challenge.
Europe’s Digital Currency Dilemma
The debate over the digital euro highlights Europe’s ongoing struggle to balance innovation with sovereignty. The US has moved quickly to secure the dollar’s dominance in the digital age, and Europe now finds itself reacting to these changes rather than setting the pace.
The possibility of placing the euro on a public blockchain signals a major shift in thinking within the EU. However, questions of privacy, trust, and adoption remain unresolved. The digital euro could strengthen Europe’s financial independence, but only if it is designed in a way that people and businesses trust.
The choice for the EU is clear: either accelerate and innovate, or risk losing ground to the dollar in the digital economy.
