Why Europe Is Racing to Launch a Digital Euro on Ethereum or Solana

TLDR

• EU officials are considering launching the digital euro on public blockchains like Ethereum or Solana instead of a private system
• The shift comes after the US passed comprehensive stablecoin regulations through the Genius Act, creating pressure on European policymakers
• Supporters believe a public blockchain could expand the euro’s reach in cross-border payments and boost adoption
• Critics worry about privacy risks since transactions on public networks are visible and open to scrutiny
• The European Central Bank has been studying digital euro options since 2021 but has accelerated plans due to US regulatory moves

European officials are moving faster on plans for a digital euro after the United States passed comprehensive stablecoin regulations. The shift represents a major change in how European policymakers view their digital currency project.

The acceleration began after President Donald Trump signed the Genius Act into law in July. The legislation creates the first comprehensive rules for the $288 billion stablecoin market.

Under the US law, stablecoin issuers must hold full reserves in liquid assets. They must also meet licensing requirements and follow strict reporting standards.

European officials had been taking a more cautious approach to their digital euro project. But the swift US action has changed their thinking about the timeline and structure.

The European Central Bank started studying a digital euro in October 2021. The project was designed as a central bank digital currency to complement cash and adapt to digital payments.

Officials originally planned to use a private ledger controlled by the ECB. Now they are debating whether to use public blockchains like Ethereum or Solana instead.

Public Blockchain Debate Emerges

Supporters of the public blockchain approach say it could help the euro circulate more widely. They argue an open system would allow the digital euro to be traded anywhere in the world.

This could strengthen the euro’s role in cross-border payments. Currently, non-European firms handle between 68% and 72% of eurozone transactions.

Critics worry about privacy and transparency risks. Public blockchains record all transactions openly, which raises concerns about user privacy and regulatory oversight.

The debate carries geopolitical weight beyond technical considerations. A private ECB system would be similar to China’s approach with its digital yuan, which operates under tight government control.

US Regulatory Framework Drives European Urgency

European policymakers worry that US stablecoin rules could accelerate global demand for dollar-backed tokens. This could weaken the euro’s position in international payments over time.

ECB executive board member Piero Cipollone has warned about the growth of dollar-pegged tokens. He says they could undermine Europe’s financial stability by shifting euro deposits overseas.

The ECB confirmed it is studying both centralized and decentralized technologies for the digital euro. However, the bank has not made a final decision on the design.

A digital euro would represent the ECB’s direct entry into digital assets. Unlike private euro stablecoins, it would serve as a public option backed by the central bank.

China is also responding to US stablecoin dominance. Beijing is considering yuan-backed stablecoins to compete with dollar-powered tokens, which make up more than 99% of global stablecoin supply.

Both options remain under consideration as European officials balance innovation with regulatory control. The final decision will shape how Europe competes in the growing digital payments market.

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