Digital Euro: EU Eyes Ethereum, Solana for CBDC Launch
Digital Euro on Public Blockchains?
European Union officials are exploring the possibility of launching the digital euro on public blockchains like Ethereum and Solana. This consideration marks a potential shift from the previously favored private, closed systems for central bank digital currencies (CBDCs), according to the Financial Times.
Key Considerations:
- Boosting Adoption: Advocates believe a public chain could significantly enhance the euro's adoption and circulation.
- Cross-Border Payments: An open blockchain would allow the digital euro to be traded globally, potentially strengthening its role in international transactions.
- Transparency Risks: Officials remain cautious about the transparency inherent in public blockchains, where transactions are openly recorded.
The European Central Bank (ECB) has confirmed that it is analyzing both centralized and decentralized technologies, including blockchain-based approaches, to accelerate the digital euro's development. However, a final design has not yet been determined.
Concerns Over Stablecoin Dominance
Following the US approval of comprehensive regulations for its $288 billion stablecoin market with the GENIUS Act, European policymakers are reassessing their digital euro plans. A key driver is the fear of losing ground in the digital payments landscape.
ECB executive board member Piero Cipollone has cautioned that the rise of dollar-pegged tokens could threaten Europe’s financial stability and autonomy by diverting euro deposits overseas and solidifying the dollar's position in international transactions.
Unlike private euro stablecoins, a digital euro would represent the ECB's direct commitment to digital assets, providing a reliable public option.
Global Trend: Countering Dollar Dominance
The EU's concerns mirror those in Beijing, where authorities are also wary of the dominance of dollar-backed stablecoins in global markets.
China is reportedly considering approving yuan-backed stablecoins to promote international use of its currency and compete with the dominance of US dollar-powered tokens. These dollar-backed stablecoins currently account for over 99% of the global supply.