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 the Genius Act creating comprehensive stablecoin regulations, pressuring European policymakers to accelerate plans
- Supporters believe public blockchain could expand euro’s reach in cross-border payments where non-European firms handle 68-72% of eurozone transactions
- Critics worry about privacy risks since public blockchain transactions are visible and open to scrutiny
- The ECB has been studying digital euro options since 2021 but must decide whether to proceed by end of 2025
The European Union is exploring major public blockchain networks for its digital euro project. The European Central Bank is considering Ethereum and Solana over private alternatives.
This marks a shift from the EU’s original plan to use a private ledger system. The change comes as US stablecoin regulations push European officials to accelerate their timeline.
The ECB started studying a digital euro in October 2021. The project was designed to complement cash and adapt to digital payment trends.
Officials originally planned to control the system through a private ECB ledger. Now they are debating whether public blockchains offer better advantages for global adoption.
The acceleration began after President Trump signed the Genius Act in July. The law creates the first comprehensive rules for the $288 billion stablecoin market.
Under US regulations, stablecoin issuers must hold full reserves in liquid assets. They must also meet licensing requirements and follow strict reporting standards.
European officials worry these rules could boost demand for dollar-backed tokens. This could weaken the euro’s position in international payments over time.
Public Blockchain Benefits and Concerns
Supporters of the public blockchain approach say it could help the euro circulate more widely. 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.
Public blockchains would also allow better integration with existing crypto infrastructure. Years of blockchain development have created tools that could support a digital euro.
Critics worry about privacy and transparency risks on public networks. All transactions would be visible and open to scrutiny by anyone.
Privacy concerns remain a key challenge for public blockchain adoption. Users want financial privacy while regulators need oversight capabilities.
Geopolitical Stakes Drive Decision
The debate carries weight beyond technical considerations. A private ECB system would resemble China’s approach with its digital yuan.
China operates its digital currency under tight government control. The system limits user privacy and gives authorities extensive monitoring power.
ECB executive board member Piero Cipollone has warned about dollar-pegged token growth. He says they could undermine European financial stability by shifting euro deposits overseas.
Dollar-backed stablecoins dominate the market at 98% of total supply. European officials want to challenge this dominance with their own digital currency.
China is also responding to US stablecoin growth. Beijing is considering yuan-backed stablecoins to compete with dollar-powered tokens.
The ECB has not made a final decision on the digital euro design. Both centralized and decentralized technologies remain under study.
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.
The ECB Governing Council must decide whether to proceed with the digital euro by end of 2025. This decision will shape how Europe competes in the growing digital payments market.
