But the US’ passage of the Genius Act and the growth of dollar-backed stablecoins has caused them to rethink those plans.
Alarmed by the growth of dollar-pegged stablecoins after the US’ passage of the Genius Act, European Union officials are considering launching a digital euro on a public blockchain such as Ethereum or Solana, the Financial Times reported on Friday.
In a statement, the European Central Bank told the paper it was considering “different technologies — both centralised and decentralised — in the development of the digital euro, including distributed ledger technologies.”
Previously, the EU’s planned central bank digital currency, or CBDC, was expected to be launched on a private network due to official’s concern that tokens issued on public blockchains could compromise users’ privacy.
According to the Financial Times, however, conversations within the EU changed after the US passed the Genius Act in July, a landmark federal law that makes it easier for major corporations to issue their own stablecoins.
The law’s proponents argued the Genius Act would be a boon for stablecoins and, in turn, US dollar dominance.
That sentiment was echoed by Pierre Gramegna, the managing director of European Stability Mechanism, a European Union intergovernmental organisation.
“And, if this were to be successful, it could affect the euro area’s monetary sovereignty and financial stability,” Gramegna said in March, referring to the success of dollar-backed stablecoins.
To tackle this threat, he urged the European Central Bank to make “the digital euro a reality to safeguard Europe’s strategic autonomy.”
One EU official, quoted anonymously, told the FT the passage of the Genius Act “rattled a lot of people” who now want to accelerate the development of a digital euro.
ECB leaders and EU officials say a digital euro could bolster Europe’s financial autonomy by creating a home-grown payment system to rival American payment giants like Visa.
While EU officials worry about the privacy implications of launching a token on a public blockchain, the digital euro has nevertheless been fraught with controversy and conspiracy theories since the ECB launched its investigation in 2021.
Many consumers want to avoid a Big Brother scenario where the central bank would be able to digitally track their spending with CBDCs.
To assuage that concern, the ECB said it would not have access to personal data. That would remain with commercial banks, which would need to host the digital euro.
Citing the potential for government surveillance, Republican lawmakers in the US have sought to preempt the development of any CBDC.
The week, the House of Representatives passed the annual National Defense Authorization Act, which includes a provision to block the Federal Reserve from issuing a digital dollar.
