Implications of a Digital Euro on Ethereum or Solana for Europe’s Financial Independence

Officials in Europe are exploring the option of issuing the digital euro on public blockchains such as Ethereum or Solana, moving away from earlier plans for a private, centrally managed system.

The conversation has gained momentum in recent weeks following the U.S.’s introduction of its first stablecoin law in July, which has given regulated dollar-pegged tokens a competitive advantage in the global market.

Ram Kumar, a key contributor at OpenLedger, highlighted to Decrypt that launching the euro on a public blockchain would significantly broaden its accessibility.

“This would instantly integrate the euro into the broader crypto economy,” Kumar stated. “It could seamlessly connect to DeFi platforms, global wallets, and facilitate cross-border transactions without needing to develop new infrastructure.”

Kumar mentioned that Ethereum could provide “programmability and access to a vibrant developer community,” while Solana could offer “affordable transactions and high throughput capable of accommodating consumer-level payments.”

Both options, he asserted, would increase the euro’s global visibility in ways that a private ledger might not.

Kumar further noted that U.S. stablecoin legislation, known as the GENIUS Act, is compelling Europe to hasten its efforts.

“If the dollar gains an advantage in digital transactions, it could overshadow the euro’s significance in global finance,” he warned.

The Financial Times initially reported that officials were contemplating the use of public blockchains late last week.

Increasing Pressure

Nevertheless, the risks associated with this model remain considerable.

The primary concern is privacy, as public blockchains conflict with the GDPR regulations within the EU, which safeguards rights such as data deletion, along with the European Central Bank’s goal to maintain cash-like anonymity in digital transactions.

Challenges in technical and governance aspects also remain, including Ethereum’s scalability issues, Solana’s reliability track record, and the fact that upgrades and validators would still be beyond direct governmental control.

Policymakers have cautioned that an easily accessible euro token might siphon deposits from banks if not designed thoughtfully.

In April, ECB board member Piero Cipollone warned that U.S. stablecoins could divert deposits from European financial institutions, further entrenching the dollar’s global dominance.

Cipollone expressed concerns that measures taken by the new U.S. administration aimed at “promoting crypto-assets and dollar-backed stablecoins” might jeopardize “Europe’s financial stability and strategic independence.”

An ECB spokesperson confirmed to Decrypt that their stance remains unchanged, referring to Cipollone’s acknowledgment in July that a digital euro could be technically operational “within the next two and a half to three years post-legislation.”