EU Fast-Tracks Digital Euro Initiative Following US Stablecoin Law

The European Union is accelerating its efforts to introduce a digital euro, influenced by the recent passage of a stablecoin law in the United States. This development has raised concerns among EU officials regarding the increasing dominance of dollar-backed stablecoins in international payments. According to a report by the Financial Times on August 22, 2023, the EU is now exploring the potential use of a public blockchain over a private one for the digital euro.

The European Central Bank (ECB) has been laying the groundwork for a digital euro for several years. When approached by the Financial Times regarding the reported acceleration of these initiatives, the ECB indicated that it is evaluating various technologies for the digital euro, although no final decisions have been made.

In March 2024, Pierre Gramegna, Managing Director of the European Stability Mechanism, expressed concerns that Europe’s monetary autonomy and financial stability could be at risk due to the U.S. administration’s interest in cryptocurrencies and stablecoins pegged to the dollar. Gramegna emphasized that the evolving U.S. stance on digital currencies makes the digital euro “more necessary than ever.”

The ECB is hopeful that the recent pro-cryptocurrency climate in the U.S. may facilitate the development of a digital euro. Piero Cipollone, a member of the ECB board, noted that the introduction of a digital currency could provide Europe with a payment system that is independent of U.S. tech companies. He highlighted that the popularity of dollar-denominated stablecoins has added urgency to the digital euro project.

Cipollone stated, “The political world is becoming more alert to this. And it’s possible that we will see an acceleration in the process.”

The Atlantic Council reported in September that 134 countries, representing 98% of the global economy, are currently exploring central bank digital currencies (CBDCs). The organization’s chair of international economics, Josh Lipsky, noted a growing trend of uptake in CBDCs, countering the narrative that countries with launched CBDCs have experienced low usage.

As the EU moves forward with its digital euro initiative, it acknowledges the competitive landscape shaped by the U.S. and its stablecoin policies. The outcome may redefine the future of digital payments in Europe and beyond, as authorities seek to ensure financial stability and autonomy in an increasingly digital world.