EU prepares launch of digital euro on public blockchains

The European Union is examining whether to issue a digital euro on public blockchains, according to a Financial Times report. The consideration marks a potential shift from earlier preferences for private systems as the European Central Bank continues developing its central bank digital currency.

Officials are studying whether the ECB’s potential digital euro could operate on open networks like Ethereum and Solana. The evaluation runs parallel to ongoing preparation work that began in November 2023. No final decision has been made, and authorities are reviewing technical requirements, privacy concerns, and policy implications before any launch.

The ECB’s current preparation phase focuses on creating the framework for potential issuance. Work includes developing wallet functionality and payment processing systems for both online and offline transactions. The central bank is building a draft rulebook and innovation platform to examine features with market participants.

About 70 participants have tested use cases through the ECB’s innovation platform, including conditional payments and integration with existing payment infrastructure. The testing examined how a digital euro would function within current financial systems. The ECB has also engaged directly with merchants and consumers while coordinating with EU lawmakers.

Using public blockchain infrastructure could expand the digital euro’s reach and improve compatibility with existing crypto networks. However, the approach raises questions about data protection and transaction visibility that European regulators have previously identified as concerns.

Under the European Commission’s 2023 proposal, a digital euro would have legal tender status, but this is not yet law. Users would access the currency through electronic wallets provided by banks or other intermediaries. 

The system aims to support everyday (including offline) payments; holding limits and privacy rules are still being designed and would depend on the final legislation.

The ECB’s preparation work centers on finalizing operational rules, testing prototypes, and supporting legislative discussions in EU institutions. The central bank stated that actual issuance remains a policy decision dependent on completing the legislative framework and achieving technical readiness.

We are pleased to see that our efforts remain on track as we keep working to deliver on the request of EU leaders to accelerate progress on a digital euro,

ECB Executive Board member Piero Cipollone said in a July progress update.

The consideration comes as European officials examine the continent’s position in digital currency markets currently dominated by dollar-denominated stablecoins issued by private companies. While euro-denominated stablecoins exist, a central bank-issued version would carry a different legal status and regulatory framework.