The push for a digital euro as a counter-strategy to the US’ stablecoin diplomacy

Burkhard Balz, a Member of the Executive Board of the Deutsche Bundesbank, has positioned the push for a digital euro as an urgent and necessary strategic endeavor for Europe’s future, as outlined in his speech at the Global FinTech Fest in Mumbai in October. He articulated that the primary rationale moves beyond mere technological upgrade, focusing instead on rectifying a critical vulnerability: Europe’s reliance on predominantly American, foreign payment infrastructures, such as Visa and Mastercard. This dependence, as Balz argues, fundamentally compromises the Eurozone’s sovereignty over a critical piece of public utility, demanding a cohesive, European-governed response.

This geopolitical imperative was dramatically amplified by the United States’ legislative move, specifically the passage of the GENIUS Act, which provides a clear and robust regulatory framework for private, dollar-backed stablecoins. The Eurosystem interprets this as a direct strategy to reinforce the global digital dominance of the US dollar. Should these dollar tokens achieve widespread adoption within the Eurozone, officials fear a scenario of “digital dollarization,” which would severely erode the euro’s monetary sovereignty, increase the risk of financial instability, and potentially draw capital away from euro-denominated assets.

In this context, the EU’s decision to develop a public form of digital money is a conscious, strategic counter-approach to the US’s private-sector-first model. The public nature of the digital euro is designed to guarantee several key policy outcomes:

First, as a direct liability of the European Central Bank, it serves as a risk-free anchor for the digital monetary system, maintaining public trust and stability in a way that no private stablecoin can guarantee. Second, the public platform is designed to prioritize the highest standards of privacy protection, unlike commercial solutions where data monetization is often the core business model. Finally, by introducing a standardized, cost-effective public infrastructure, the digital euro is intended to foster genuine competition and innovation. Private European fintechs will be incentivized to compete on the quality and creativity of services built atop this neutral rail, rather than being forced to operate solely within the ecosystems of foreign payment providers, thereby securing a truly European digital payments space.

While the European Union’s focus on internal market integration and strategic autonomy provides a unique domestic urgency, the underlying motivations for issuing a CBDC are broadly shared across the globe. From China’s ambition to reduce US dollar dependence to emerging economies like the Bahamas focusing on financial inclusion, or advanced nations like Sweden seeking to preserve the central bank’s link to the public amidst declining cash use, the push for public digital currencies is a worldwide phenomenon. The escalating competition from dollar-backed stablecoins, post-GENIUS Act, only heightens the urgency for countries worldwide to accelerate their digital currency programs.