Written by: Long Yue, Wall Street Insight
In the face of the rapid advancement of US stablecoin legislation, the EU is reassessing and accelerating its digital euro plan to defend the competitiveness of the euro and Europe's financial sovereignty.
According to a report by the UK Financial Times on August 22, sources involved in discussions revealed that the Genius Act, a bill passed by the US Congress last month aimed at regulating the $288 billion stablecoin market, has caused a stir in Brussels and Frankfurt. This bill has prompted EU officials to feel a sense of urgency, believing that action must be accelerated.
EU officials have recently been "reconsidering the digital euro plan." Insiders have indicated that the swift passage of this legislation in the US has "shocked many," adding, "They are saying, 'Let's speed up, let's work hard.'"
At the same time, this sense of urgency is driving a significant technological shift. EU officials are now more seriously considering operating the digital euro on public blockchains like Ethereum or Solana. This move sharply contrasts with previous expectations of favoring private blockchains due to privacy concerns.
Concerns over dollar dominance
The legislative progress in the US regarding stablecoins has intensified long-term concerns among European policymakers about dollar dominance. Currently, the vast majority of the stablecoin market is composed of dollar-denominated tokens operated by cryptocurrency companies like Circle and Tether, while traditional US financial giants like Citigroup and JPMorgan are also considering issuing their own stablecoins.
Piero Cipollone, a member of the European Central Bank's Executive Board, warned in April this year that the US government's promotion of dollar-backed stablecoins has "raised concerns about European financial stability and strategic autonomy." He pointed out that this could lead to "euro deposits moving to the US, further strengthening the dollar's role in cross-border payments."
In contrast, the market size of euro-denominated stablecoins remains very small. The largest euro stablecoin, issued by Circle, has a market capitalization of only $225 million, which pales in comparison to the vast dollar stablecoin market. One participant in the discussions stated that the US bill "is fostering a dialogue that did not exist before," pushing the EU to take more decisive action.
Significant shift in technological path
To address the challenges, an essential strategic adjustment for the EU is under discussion: the technological foundation of the digital euro. Previously, it was widely anticipated that the digital euro would operate on a privatized network controlled by the central bank.
However, according to informed sources, public blockchain solutions are being "taken more seriously." Operating the digital euro on a public blockchain could theoretically facilitate its trading anywhere, greatly enhancing its circulation and use. However, this approach also brings new challenges, primarily that the transparency of public ledgers may raise user privacy concerns, which is the core reason for the official's previous caution.
Today, in order to compete with the US-dominated, market-based digital asset ecosystem, the EU seems willing to reassess the pros and cons between openness and privacy.
Global central bank digital currency race
The latest moves from the European Union exemplify the accelerating global central bank digital currency (CBDC) race. The European Central Bank has been researching the digital euro for several years, and its supporters believe that as cash usage declines, a central bank-backed digital currency will provide the public with a secure payment method, while also enhancing the international status of the euro.
In this race, China's digital yuan is considered to be in the lead, while the UK is also considering creating a digital pound. For the EU, issuing a digital euro directly through the European Central Bank will be a decisive step in solidifying the region's commitment to digital assets, as Piero Cipollone stated: "Europe cannot overly rely on foreign payment solutions."
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