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European policymakers are stepping up efforts to bring a digital euro to market after the US enacted landmark legislation for stablecoins, raising alarm in Brussels about the euro’s long-term competitiveness.
Europe accelerates digital euro plans
While the EU and the UK have endlessly dithered over cryptocurrency in general, the US Congress recently approved the Genius Act, a regulatory framework for the $288bn stablecoin market, which remains dominated by dollar-pegged tokens.
In case you were uncertain about USD’s total dominance, as of mid-2025, roughly 99% of the global stablecoin market is pegged to the US dollar, with only a very small percentage pegged to other currencies like the euro or Japanese yen, or to other assets like gold.
Given the persistent messaging coming from the EU regarding payments sovereignty it is awkward for them to suddenly have to acknowledge that they are trying to close the barn doors after the horse has bolted.
In the UK the situation is even worse as officials are still looking at the creature with four legs in front of them and scratching their heads as to what it is.
The swift passage of the US bill has unsettled officials at the European Central Bank (ECB) and within EU institutions, according to people involved in the discussions, and has prompted renewed debate about both the speed and the technical design of a European central bank digital currency (CBDC).
Strategic Autonomy at Risk
The concern is not simply about technology, but about sovereignty.
Piero Cipollone, a member of the ECB’s executive board, warned earlier this year that the promotion of dollar-backed stablecoins by Washington risked encouraging capital flight from euro deposits into US-based assets.
That, he argued, would threaten Europe’s financial stability and diminish its autonomy in cross-border payments.
With stablecoins such as Circle’s USD Coin and Tether (amongst many others) gaining widespread adoption, and with US banks including Citi and JPMorgan reportedly considering their own tokenised deposits, the dollar’s digital reach could extend far beyond its existing dominance in traditional finance.
For Europe, the prospect of being overshadowed in the next generation of money has triggered fresh urgency.
Rethinking the Technology Base
One striking development in the EU’s deliberations is the renewed consideration of public blockchains such as Ethereum or Solana as possible platforms for a digital euro.
Until recently, ECB officials were expected to favour a private, permissioned infrastructure resembling China’s e-CNY model.
Such a design would provide tighter control and enhanced privacy safeguards, but at the cost of global interoperability.
Running a digital euro on a public ledger would make it easier to trade internationally and could help boost its circulation, though the openness of such networks inevitably raises concerns about user privacy and data visibility.
“It’s definitely something that officials are taking more seriously now,” said one person familiar with the talks.
Competitive Stakes
The debate underscores a broader strategic dilemma for the eurozone.
Cash usage is declining rapidly, while private payment platforms—often foreign-owned—are gaining ground.
Although a handful of euro-denominated stablecoins already exist, the largest being Circle’s EURC with a modest market capitalisation of $225m, they lack the credibility and scale that a central bank-backed token could command.
As policymakers weigh competing models, the clock is ticking.
China has already rolled out its digital yuan at scale, while the UK is exploring a “digital pound”.
If the ECB delays too long, it risks ceding ground not only to the dollar but also to other central bank digital currencies.
The ECB has confirmed it is assessing both centralised and decentralised options and insists no final decision has been made.
Yet the external pressure of US policy has clearly altered the calculus.
For Europe, the digital euro is no longer a purely technological experiment but a matter of geopolitical and economic necessity.
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