EU lawmakers back digital euro as bloc races to bolster monetary sovereignty

A digital euro is closer than ever after lawmakers on Tuesday backed a currency that would have both online and offline functionality.

It was the first time the European Parliament backed a digital euro — which will be the product of the European Central Bank — with lawmakers acknowledging that they would have to step up efforts to compete with other entities racing to digitise payments.

“Members of parliament say the increasing digitalisation of payments, if left exclusively to private and non-EU actors, risks creating new forms of exclusion for both users and merchants, and they want the ECB to intensify its monitoring of crypto-assets,” a summary of the session on the Parliament’s website read.

A digital euro has been years in the making and Tuesday’s vote comes amid brisk growth for US dollar stablecoins. The US government last year approved legislation to regulate stablecoins.

The rise of the stablecoin

A digital euro would be different to dollar-pegged stablecoins as the European Central Bank would be the centralised entity with direct control over the product.

Digital dollars, in the form of stablecoins, are issued by private companies that have assets like US treasury bills backing the tokens in reserves. Last year, President Donald Trump signed an executive order banning the development of a central bank-issued digital dollar.

ECB executive board member Piero Cipollone last month said that a properly designed digital euro would counter the surge in US stablecoins as EU citizens wouldn’t need to use anything other than the electronic version of their currency.

It isn’t clear what blockchain the digital euro would run on, if at all, but the Financial Times last year reported that the ECB was looking at networks like Ethereum and Solana.

The ECB did not immediately respond to DL News’ request for comment.

Trump last year signed the Genius Act to establish a framework for issuing stablecoins. Now, private companies and American banks are releasing stablecoins or exploring the idea of debuting their own, and the supply of dollar-pegged stablecoins has grown nearly 20%.

Privacy-focused

Concerns around privacy have been raised with a central bank digital currency, but the ECB assured citizens it would be just like using cash.

ECB president, Christine Lagarde, said in a speech on Monday that the digital euro was necessary “to complement physical cash with its digital equivalent” and will, like cash, “guarantee the highest level of privacy.”

Despite the ECB racing ahead with its CBDC, euro stablecoins would still exist alongside it. There are at least 21 in existence today, and 11 European banks last year formed a company to launch a euro-pegged token, expected to be released in 2026.

S&P Global Ratings last week said that the euro-backed stablecoin market is likely to boom from its current value of €650 million to €1.1 billion by 2030 — or $773 million to $1.3 billion.

Mathew Di Salvo is a news correspondent with DL News. Got a tip? Email at [email protected].