EU and U.S. Redefine Global Finance in Digital Currency Duel

The European Union is accelerating efforts to launch a digital euro in response to the growing momentum of U.S. digital asset initiatives, particularly the enactment of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act. This development underscores a broader global competition to define the future of digital money and financial infrastructure.

The U.S. Treasury, in a press release dated August 18, 2025, detailed its fulfillment of the requirements under the GENIUS Act, a first-of-its-kind national legislation aimed at establishing a regulatory framework for stablecoin issuance in the United States. The law, signed into effect on July 18, 2025, mandates that USD-backed stablecoin issuers maintain 1:1 reserves in cash or short-term Treasurys and provides a clear regulatory path for both bank and non-bank entities. By legitimizing stablecoins, the GENIUS Act is expected to catalyze broader adoption across financial and fintech sectors, with implications for cross-border payments, corporate treasury management, and asset settlement.

The U.S. Department of the Treasury has issued a Request for Comment as part of its ongoing implementation of the GENIUS Act, seeking public input on innovative methods to detect illicit activity involving digital assets. The focus includes artificial intelligence, blockchain monitoring, and digital identity verification. This move highlights the U.S. government’s dual objective: promoting digital innovation while maintaining robust regulatory oversight to mitigate financial crime risks.

Against this backdrop, the European Central Bank (ECB) is advancing its own initiative to develop a digital euro, a central bank digital currency (CBDC) intended to preserve the role of cash in an increasingly digital economy. According to ECB Executive Board member Piero Cipollone, the digital euro aims to ensure privacy, security, and financial inclusion by offering a public, neutral, and universally accessible payment method. The ECB is currently in the preparation phase of its digital euro project, with a realistic launch window estimated between 2027 and 2029.

The digital euro is not designed to challenge the global dominance of the U.S. dollar but rather to reinforce the euro's role as a trusted and stable means of payment within the eurozone. ECB officials have emphasized that the digital euro is a domestic retail payment solution, not a global reserve asset. In the first quarter of 2025, the euro accounted for 20.06% of global currency reserves, compared to the dollar’s 53% share. Despite the euro’s relative strength, the U.S. continues to maintain an unmatched safe-asset market in Treasuries, which remains a key pillar of dollar dominance.

The ECB has acknowledged the growing influence of non-European private payment platforms and expressed concerns about the erosion of monetary sovereignty as cash use declines. The digital euro would offer a sovereign, secure, and cost-free alternative to private payment systems, ensuring that European citizens retain a public digital payment option. It would also support financial inclusion by accommodating users without access to traditional banking infrastructure and provide a resilient payment solution during emergencies.

The race to develop digital currencies highlights a fundamental shift in how central banks and governments are responding to the rapid evolution of digital finance. While the U.S. is focusing on stablecoin regulation and market innovation, the EU is prioritizing the preservation of public monetary infrastructure. Both approaches reflect the urgent need to adapt to a digital economy while balancing innovation with oversight, privacy, and financial stability.

Source: [1] Treasury Issues Request for Comment Related to the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act (https://home.treasury.gov/news/press-releases/sb0228) [2] Cash is king: Why does the eurozone need a digital euro? (https://www.euronews.com/business/2025/08/20/cash-is-king-why-does-the-eurozone-need-a-digital-euro) [3] Cash is king: Why does the eurozone need a digital euro? (https://finance.yahoo.com/news/cash-king-why-does-eurozone-050203228.html)