Europe Rises to Reinvent Cash in a Digital World

The European Union is accelerating its development of a digital euro in response to the U.S. enacting sweeping stablecoin regulations, according to recent reports. The European Central Bank (ECB) has intensified its efforts to issue a central bank digital currency (CBDC), aiming to preserve the role of public money in the digital era and ensure financial sovereignty amid growing reliance on foreign payment systems.

Piero Cipollone, member of the ECB Executive Board, emphasized in a July speech that the digital euro is critical for maintaining the ECB’s relevance in everyday transactions and countering the dominance of non-European payment solutions. He noted that the declining use of cash—down from 68% to 40% in transaction volume between 2019 and 2024—poses a threat to monetary autonomy and consumer choice.

The ECB’s digital euro project is designed to function like cash but in a digital form. It would be free to use, universally accepted, and accessible offline, making it a secure alternative during emergencies such as power outages. Users would load funds into a digital wallet, likely through a bank or public authority, and transactions would be instant and private. The ECB has also signaled that holding limits would apply to prevent large-scale withdrawals from bank deposits.

A key debate within the EU involves the technology underpinning the digital euro. While the ECB had previously leaned toward a private, closed system, recent discussions suggest officials are now considering the use of public blockchains such as Ethereum and Solana. This shift could enhance the digital euro’s adoption and circulation, potentially strengthening its role in cross-border payments. However, concerns remain regarding the transparency of public blockchains, which record transactions openly.

The U.S. approval of the GENIUS Act in 2025, which regulates its $288 billion stablecoin market, has further prompted European policymakers to reassess their approach. Cipollone warned that the rise of dollar-pegged stablecoins could shift euro deposits overseas and entrench the dollar in international transactions, undermining Europe’s financial stability and autonomy.

Despite these ambitions, the digital euro is not intended to challenge the U.S. dollar’s global dominance. The ECB has made it clear that the digital euro is a domestic retail payment tool, not a global reserve asset. As of the first quarter of 2025, the U.S. dollar still held a dominant 53% share of global reserves, compared to the euro’s 20.06%. The ECB has no immediate plans to position the digital euro as a substitute for the dollar in international finance.

The digital euro is still in the preparation phase, with a potential launch window estimated between 2027 and 2029. Once the ECB Governing Council gives final approval and the legislative process concludes, the development phase is expected to last two to three years. If implemented, the digital euro will provide a secure, private, and public alternative to the growing reliance on private digital payment systems.

Source:

[1] 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)

[2] EU looks at public blockchains like Ethereum and Solana for digital euro (https://cryptobriefing.com/digital-euro-blockchain-eu-plans/)