European Union policymakers are currently engaged in discussions about accelerating the implementation of a digital euro in response to the recent enactment of the GENIUS Act in the United States. The legislation, which provides a regulatory framework for the stablecoin sector dominated by dollar-pegged tokens such as Tether’s USDT and Circle Internet’s USDC, has prompted concerns within the EU about maintaining pace in the rapidly evolving realm of digital currencies.
The unexpected approval of the GENIUS Act by the U.S. Congress has raised alarms in Europe, with fears that the dominance of dollar-pegged tokens could strengthen America’s influence over cross-border payments unless the EU accelerates its own digital currency initiatives. As a result, EU officials are now contemplating the possibility of launching a central bank digital currency (CBDC) on public blockchains like Ethereum or Solana, departing from the previously favored private infrastructure approach.
While the European Central Bank (ECB) had initially considered a private and centralized system for a digital euro due to privacy and security concerns, the shifting regulatory landscape in the U.S. has prompted a reevaluation. Some policymakers are now open to exploring decentralized networks that could enhance the circulation of the euro and enable it to compete more effectively against dollar-backed digital assets on a global scale.
For years, the ECB has been conducting research on a digital euro as a public alternative to privately issued payment systems amid declining cash usage. However, the growing momentum behind digital currencies in the U.S. has raised fears that euro reserves may increasingly flow into dollar-denominated assets overseas. With countries like China testing their digital yuan and the U.K. contemplating a digital pound, the pressure on Europe to launch a digital euro has intensified.
Although there are already a few euro-backed stablecoins in existence, such as Circle’s EURC, a central bank-issued digital token would carry significantly more weight. The ECB has confirmed its ongoing evaluation of both centralized and decentralized technologies for a digital euro, underscoring the urgency of safeguarding the euro’s relevance in an increasingly digitized economic landscape.
Read more: ECB Says U.S.-Backed Stablecoin Use in EU Could Weaken Its Monetary Autonomy