Simply put
- The recent stablecoin legislation in the US has put new pressure on Europe to hasten its digital euro initiatives.
- There’s a notion that by launching it on platforms like Ethereum or Solana, the euro’s global presence could increase.
- Nonetheless, issues around privacy, governance, and bank stability are still significant concerns for officials.
European leaders are contemplating the possibility of issuing digital euros on public blockchain networks such as Ethereum and Solana, rather than sticking with earlier plans for a more isolated central system.
Since the US passed its initial stablecoin law in July, discussions have really ramped up, potentially giving dollar-backed tokens an early advantage in international finance.
Ram Kumar, who contributes to the blockchain firm OpenLedger, mentioned that moving the euro to public chains could greatly enhance its reach.
“This would instantly integrate the euro into the broader crypto landscape,” Kumar noted. “We could connect that infrastructure to DeFi, global wallets, and cross-border transactions without needing to start anew.”
Kumar also emphasized that Ethereum offers a wealth of development opportunities, while Solana is known for its low fees and capacity for high-volume consumer transactions.
Both these platforms could enhance the euro’s visibility in Europe in ways that aren’t possible with private ledgers.
Kumar further commented that the US stablecoin law, often called the act of genius, compels Europe to accelerate its plans.
“If the dollar establishes a lead in digital payments, it risks overshadowing the euro’s role in global finance,” he added.
Reports have surfaced suggesting that officials were indeed considering the shift to public blockchain as recently as last week.
In any case, a spokesperson from the European Commission indicated that “the regulations concerning the digital euro will be technology-neutral,” and added that discussions about the proposal are still occurring between the European Parliament and the Council.
Mounting pressure
Still, there are considerable risks associated with such models.
Privacy stands as a crucial factor, especially considering rights associated with data under the EU GDPR Framework, and the European Central Bank’s objective to maintain cash-like anonymity in digital payments.
Technical challenges and governance problems are prevalent, notably Ethereum’s scalability issues, Solana’s reliability, and the fact that upgrades and governance are not directly controlled by the state.
Policymakers caution that if euro tokens are made widely accessible without proper design, this could lead to a situation where deposits are pulled from banks.
In April, ECB Executive Committee member Piero Cipollone warned that US stablecoins could draw deposits away from European banks and bolster the dollar’s position globally.
Further, measures initiated under the Trump administration to support crypto assets and US dollar-backed stablecoins have sparked concerns regarding “European financial stability and strategic autonomy,” Cipollone remarked back then.
An ECB spokesperson reiterated that their position remains unchanged, referring to earlier confirmations that the digital euro could be technically feasible by July.
“The Eurosystem is testing a variety of technologies, both centralized and decentralized, in developing the digital euro, including distributed ledger technology,” the spokesperson noted. “No final decision has been made as yet.”
