The European Union is expediting its work on the digital euro project in light of new U.S. legislation regulating the stablecoin market, raising concerns about the euro's competitiveness in the cryptocurrency sector.
Comparison of Stablecoins in the US and EU
Recently, the U.S. passed the Genius Act, providing a clear regulatory framework for the stablecoin market. The stablecoin industry in the U.S. is predominantly dollar-centric, boasting a market size of $288 billion. The largest stablecoin, USDT, holds a market size of $167 billion, followed by USDC at $67.5 billion and USDe at $11.8 billion. This situation has prompted European authorities to expedite the development of the digital euro.
Competition and Future Steps
EU officials express concern that the digital technology and financial market may lag behind the U.S. The need for the euro to compete internationally with other digital currencies is driving the acceleration of the digital euro project. An EU official remarked, "The U.S.’s new regulation mandates Europe to swiftly act on the digital euro." At the same time, even China, with its CBDC and closed economy, has started discussions on issuing stablecoins on public networks.
Development and Infrastructure of Digital Euro
In response to U.S. legislation, European officials are reevaluating the digital euro project. Discussions revolve around whether the digital euro should remain confined within a closed system under the control of the European Central Bank or be developed on public blockchains. Currently, the emphasis is on a centralized system, although no conclusive decision has been reached yet.
In the upcoming period, EU institutions are expected to debate various technological infrastructure options for the digital euro, highlighting the importance of strategic planning to maintain the euro's competitiveness on the global stage.
