Digital euro: the ECB tempted by public blockchains

Is a new wind blowing through Frankfurt? After more than two years of reticence about blockchain, the European Central Bank (ECB) seems to be softening its stance, reveals the Financial Times this Friday.

The institution is even reportedly considering launching its digital euro on public blockchains such as Ethereum and Solana. "All options are on the table," confirmed a source close to the matter.

This strategic U-turn comes as the US strengthens its lead with dollar stablecoins, which are already massively used on public blockchains.

In July, in keeping with his campaign promise, President Donald Trump pushed through the Genius Act, which establishes a clear regulatory framework for stablecoins. The text, which has been well received by the US ecosystem, imposes reserve requirements (each stablecoin must be fully backed by liquid assets such as Treasury bonds), the monthly publication of audited reports and an annual independent audit.

If Christine Lagarde and her team were to opt for a public infrastructure in their turn, it would be a major turning point. "Public blockchains are the new payment highways: it's essential to be present on them," stresses an industry expert.

A digital euro on public blockchain could thus become a serious rival to the American giants Visa, Mastercard or Stripe, who are also engaged in this technological race.

Privacy and financing

But two major challenges remain.

The first concerns the protection of privacy. Many fear that the digital euro, whatever its architecture, will lead to increased risks of traceability and surveillance. At the beginning of August, Christine Lagarde described it as a form of "digital cash". However, unlike physical banknotes, it would inevitably be traceable. "This could bring us closer to a Chinese-style system", warns the head of a crypto company.

The second challenge is structural: unlike dollar stablecoins, the digital euro would not play a direct role in financing European debt. Every USDC or USDT issued today corresponds to a dollar invested in US Treasury bonds, generating hundreds of billions that directly fund the federal government, as The Big Whale data shows.

The digital euro, on the other hand, relies on its legal tender status and the ECB's assets, but without a 1-for-1 system (the ECB's balance sheet is made up of debt securities, gold and a few other assets).

"The digital euro would therefore lack this virtuous dynamic between private savings, capital markets and monetary sovereignty", points out one banker who, like many others, is critical of the arrival of a potential digital euro. "

Finally, while a digital euro on a public blockchain would make it possible to make up some of the ground in Europe in terms of innovative payments, one crucial question remains: where are the euro stablecoins capable of assuming, for Europe, the strategic role that dollar stablecoins already fulfil for the United States?

Some initiatives exist - SG Forge (Société Générale's crypto subsidiary), Schuman Financial, AllUnity or Circle - but they are struggling to establish themselves in the face of MiCA regulations deemed by many to be too restrictive, particularly on reserve management.