Key Points:

• European policymakers are increasing their efforts to introduce a digital euro, as cited by the Financial Times, in response to the recently passed U.S. stablecoin law that pressures the EU to advance its digital currency initiatives.

• The GENIUS Act, passed by the U.S. Congress last month, establishes a regulatory framework for a stablecoin market valued at $288 billion, dominated by dollar-pegged currencies like Tether’s USDT and Circle Internet’s USDC. This has raised concerns among European officials about the potential for dollar-backed tokens to strengthen America’s dominance in global payments unless the EU accelerates its own digital currency efforts.

• There’s a significant shift underway; officials are now considering launching a central bank digital currency (CBDC) on public blockchains (such as Ethereum or Solana), departing from previous ideas of a centralized controlled system.
  Translation: There is a notable change as officials reconsider using public blockchain systems like Ethereum or Solana instead of a centralized one, which was initially planned.

• Previously, the European Central Bank (ECB) was looking toward a private infrastructure for launching a digital euro due to issues of privacy and security. However, the new U.S. legislation has influenced restructuring discussions, encouraging a more open and competitive approach to digital assets.

• The ECB has been studying the potential of a digital euro for several years, positioning it as a public alternative to privately issued payment platforms amid waning cash use.

• With China’s digital yuan pilot and the U.K.’s interest in a digital pound, Europe is under rising pressure to keep pace. Current euro-backed stablecoins exist, such as Circle’s EURC, but an ECB-issued token would represent a far more significant financial development.

• The ECB has confirmed it’s exploring centralized and decentralized technologies, keeping options open for a blockchain-based euro to ensure the euro’s relevance in a digitizing global economy.

Read more: ECB Says U.S.-Backed Stablecoin Use in EU Could Weaken Its Monetary Autonomy