According to a Financial Times report, the European Union (EU) is mulling the launch of a digital euro on public blockchains like Ethereum or Solana. This is in an attempt to make it more accessible and compatible in the wake of increased global stablecoin competition, especially given the recent signing into law of the U.S. GENIUS Act.
Accelerated Action Due to Global Competition
The quick response of the U.S. government to control stablecoins has compelled the EU to reactivate its plans for a digital euro. According to reports, the EU authorities fear that they would lose their monetary influence to dollar-stablecoins. This has accelerated the plans for the digital euro since the EU wishes to maintain its economic influence in the international economy.
Advantages of Public Blockchains
Using public blockchains such as Ethereum or Solana would significantly enhance the reach of the digital euro. The technology is mature with enormous infrastructure and incentives that could potentially cut deployment time behind them. The solution lacks privacy, regulatory, and compliance features. Privacy experts contend that technologies such as zero-knowledge proofs may end up being a requirement in an effort to balance data protection and openness.
Challenges and Privacy Concerns
The most difficult task in launching a digital euro on an open blockchain is finding the right balance of accessibility and privacy. Public blockchains disclose transactions in plain sight, which would understandably expose users’ data publicly. The EU would have to provide robust privacy measures to protect users without violating the rules. This added complexity is more expensive to run and can trigger further delays.
Next Steps for the EU
The EU reaction should be to design a multi-layer architecture for the digital euro. This would involve a central issuance layer, a middleware compliance layer, and wallet apps. Policy makers ought to roll out tight architectures of regulation and technical requirements before pilot schemes are released. Pilot launch announcements and privacy policies will be heard over the coming months.
While the US and others work on their stablecoin initiatives, the EU is set to defend the international role of the euro. Privacy, oversight, and access will be just as crucial as the digital euro initiative continues.
