Core Focus: The European Union’s approach to digital currency: the legislative procedure for the digital euro, the MiCA framework restricting private euro stablecoins, and the strategic objectives of protecting European monetary sovereignty and payment autonomy.

In-Depth Notes:
The European Union is pursuing a nearly opposite approach to the United States. While the US promotes private stablecoins and prohibits a retail CBDC, the EU is systematically developing a digital euro as a publicly governed infrastructure, while significantly restricting private euro-denominated stablecoins under the Markets in Crypto-Assets Regulation (MiCA) .

The Digital Euro Legislative Process:
In June 2023, the European Commission adopted the Single Currency Package, which includes two legislative proposals: one establishing a legal framework for a digital euro, and another strengthening the legal tender status of euro banknotes and coins . The digital euro proposal aims to complement cash by ensuring that people and businesses have an additional choice to pay digitally using a widely accepted, low-cost, secure, and resilient form of central bank money in the euro area . It is designed to coexist with, and complement, cash and private digital payment solutions . The proposed digital euro would be intermediated: it would be issued by the European Central Bank (ECB) and distributed to users through supervised payment service providers (PSPs) .

The MiCA Framework Restricting Private Stablecoins:
The EU’s Markets in Crypto-Assets Regulation (MiCA) significantly restricts the development of privately issued euro stablecoins by requiring issuers to maintain a large portion of their collateral in the form of bank deposits and limiting the use of foreign currency stablecoins in payments . This makes euro-denominated stablecoins less attractive than traditional bank deposits . The EU’s own framework for the closest equivalent instrument—electronic money tokens (EMTs) under MiCA—imposes a structurally similar requirement: at least 30 percent of reserves must be held in segregated accounts with credit institutions, with the remainder invested in low-risk, highly liquid instruments, which in practice means short-dated sovereign debt .

Protecting Monetary Sovereignty and Payment Autonomy:
The digital euro is seen as an instrument to strengthen the singleness of the euro in a digitalising economy and to protect European payment autonomy . ECB board members have been vocal: Piero Cipollone cited the Trump executive order as among the reasons the digital euro had become necessary, whilst Philip Lane argued that a retail CBDC was “imperative” as a tool to limit the dominance of foreign digital currencies . On July 13, 2026, the European Parliament and member states officially launched negotiations to finalize the legal procedures for a digital euro, with the goal of putting it into operation from January 1, 2027 .

The Strategic Concern about Dollar Stablecoins:
From Brussels and Frankfurt, a further concern has emerged: given that stablecoin reserves must be backed by US short-term sovereign debt, widespread adoption of dollar stablecoins in Europe would effectively channel European savings into the financing of the US Treasury, compounding the broader worry that dollar stablecoins could substitute for the euro in payments and complicate monetary policy transmission .