Digital Currencies: A Question of Sovereignty

Introduction

Recently, the American Senate took a decisive step by approving, on June 17, 2025, the GENIUS Act (S.1582) with a bipartisan vote of 68 to 30. This legislation represents the first federal regulatory framework for stablecoins to be approved by one of the two chambers of Congress after years of debate, and it now heads to the House of Representatives.

This development marks a crucial moment in the global digital currency landscape, where Europe and the United States are playing two very different games. The EU is developing the Digital Euro, a public currency under the control of the Central Bank. The United States, on the other hand, with the approval of the GENIUS Act, seems to have reinforced its vision of delegating digital currency to private, dollar-denominated stablecoins, letting them carry the dollar's flag into the digital era.

This is not merely a technical difference: it is a clash of visions on the role of the State, the market, and technology in global finance. Europe, with all its limitations, is trying to defend the idea that money, even in its digital form, should remain a public infrastructure, accessible and democratically governed. The U.S., on the contrary, seems to want to outsource this function to private entities, often opaque and with distorted incentives, in the hope that the “primacy of innovation” will guarantee the dollar’s dominance. But at what cost?

Italian version

Author's Note: This analysis is not intended as a comprehensive financial treatise. My interest in digital currencies stems from my specialization in digital infrastructures and their direct impact on digital sovereignty, understood as our technological autonomy. In continuity with my previous reflections on Digital Cooperation: the strategic response to technological dependence, I intend here to explore how the challenge of the Digital Euro represents a concrete area for applying this strategy, moving beyond theoretical discussions on the creation of hypothetical European technology stacks. Current choices are shaping the future of money and our capacity for self-determination. I hope these observations can contribute to a broader and more conscious debate on consequences that deserve greater attention.

The US Strategy: Stablecoin Regulation for Dollar Dominance

The American approach, exemplified by the GENIUS Act, is entirely aimed at providing regulatory certainty to private stablecoins. In practice: it normalizes the fact that private companies, many of which are offshore-based and controlled by speculative investors, can issue quasi-monetary instruments with systemic impacts. The fact that these are pegged to the dollar does not make it less risky; on the contrary, it consolidates a form of digital monetary dominance without public accountability or democratic control.

But what are the concrete risks of this "abdication" of the State? Stablecoins, by their nature, are not immune to problems. We have seen "de-pegging" events, where their value diverged from the dollar peg, often due to liquidity problems of the issuers. Consider the case of USDC in 2023, which fell to $0.87 due to exposure to the Silicon Valley Bank failure. A 2023 study by the Bank for International Settlements (BIS) revealed that all 60 stablecoins examined had lost their peg at least once.

Then there's counterparty risk, which includes fraud, hacking, or issuer failure, leaving holders without a safety net beyond the company's own capital. Unlike fiat money, stablecoins are not universally interchangeable, which adds costs and complexity. And if these private currencies were to be adopted on a large scale, they could exert significant pressure on monetary policy and financial stability, especially in Europe, with the risk of outflows of euro deposits to dollar-denominated stablecoins.

The American illusion is that more market equals more innovation. But in the field of money, more market can also mean more instability, less transparency, and greater concentration of power. The risk for Europe is concrete: if dollar stablecoins become the de facto standard in global digital payments, the euro risks losing relevance even at home. In a context where cash is disappearing and large tech players (almost all U.S.-based) intermediate payments, European monetary sovereignty is being eroded.

This is where the Digital Euro can play a key role, if it is designed ambitiously. It is not enough to create a public alternative: a real European payment infrastructure is needed, one that is interoperable, secure, and accessible. And the political will is needed to resist the extreme financialization of the digital realm that is setting a precedent across the ocean.

The European Way: Objectives and Design of the Digital Euro

The Digital Euro is configured as a digital form of central bank money, an electronic equivalent of cash, issued directly by the European Central Bank (ECB) or national central banks. It will be a direct liability of the central bank to users, thus guaranteeing maximum security.

The primary objective of this initiative is twofold: to provide a public, risk-free, and widely accessible payment option in an increasingly digitally-oriented society, while simultaneously strengthening European monetary sovereignty and reducing dependence on non-European private providers in the payment sector. The Digital Euro will complement cash, not replace it, aiming to simplify everyday payments, both online and in physical stores, and enabling transactions even in offline mode.

A fundamental aspect of its design is privacy, with the goal of offering a higher level than current digital payment methods. Offline payments, in particular, will ensure the highest level of confidentiality, comparable to that of cash, with data known only to the payer and payee. For online payments, the Eurosystem will not be able to directly link transactions to the user's identity.

The digital currency will be accessible to all residents of the euro area, including those without a bank account, thereby promoting financial inclusion and facilitating use even for people with disabilities or limited digital skills. It is expected to be free for consumers for basic functions and low-cost for commercial activities, thanks to the European public infrastructure, thus potentially reducing dependence on international circuits and lowering fees.

Another distinctive feature is its non-remuneration: the Digital Euro will not bear interest. This choice is strategic to prevent it from becoming a primary store of value and to preserve bank deposits, maintaining the stability of the financial system. Furthermore, while programmability is a potential feature of digital currencies, the Digital Euro will not be "programmable money" in the sense of imposing limits on where or when it can be spent or having expiry dates. This aims to alleviate concerns about state control. However, it is hypothesized that in the future it could support functionalities for automated promotions or loyalty programs for commercial activities.

The Digital Euro project is currently in its preparation phase, which began in November 2023, after the conclusion of an investigation phase. It is important to emphasize that this phase does not yet imply a definitive decision on issuance. The ECB, the main driver of the project, has set October 2025 as the deadline for the definitive decision. Should the project receive final approval (which also requires the green light from the European Parliament and the Council), limited-scale pilot experiments are planned to start from 2026, with a subsequent implementation phase lasting approximately two years.

The distribution of the Digital Euro and the provision of related services are envisaged through private intermediaries (banks and Payment Service Providers - PSPs). This "intermediated" model differs from that of the Chinese e-CNY, where the central bank interacts directly with the public. The ECB actively engages with market operators and expects them to drive innovation in compatible technologies, but the success of the Digital Euro will largely depend on the willingness and ability of private financial institutions to integrate and promote it. The multi-year, multi-phase approach adopted by the ECB denotes a highly cautious and risk-averse strategy, designed to ensure stability and careful integration into the existing financial system.

The Challenges of the Digital Euro

Despite its ambitions and careful design, the Digital Euro's path is fraught with significant political challenges, particularly the opposition and concerns expressed by commercial banks. The latter fear a potential "deposit flight" from traditional bank accounts to the Digital Euro, which is perceived as a risk-free safe haven. Such a scenario would reduce their available liquidity for lending and necessitate a review of their business models.

To address these concerns and safeguard financial stability, the Digital Euro's design includes conservative choices: it will be non-remunerated (without interest) and will likely have individual holding limits (e.g., a proposed maximum of 3,000 euros). Businesses will not be able to hold Digital Euros as a store of value but only receive them as payments. The gradual introduction of the project is also a strategy aimed at reducing systemic risks such as sudden deposit outflows. The ECB, while believing that the banking sector can manage such reductions and benefit from the new platform for innovation, finds itself balancing different interests.

This caution, although fundamental for internal stability, limits innovation and creates an inherent tension with the Digital Euro's external strategic objectives. A key political argument in its favor is precisely the safeguarding of Europe's monetary sovereignty and strategic autonomy, by reducing dependence on non-European private payment infrastructures (like Visa, Mastercard, Apple Pay, Google Pay).

However, the design choices aimed at placating the banking sector's concerns, by limiting the Digital Euro's attractiveness as a store of value, could inadvertently limit its potential for widespread adoption and, consequently, its effectiveness as a geopolitical instrument. If the Digital Euro were perceived as too limited in its utility, European citizens and businesses might increasingly resort to digital dollars or stablecoins linked to non-European currencies, eroding the euro's relevance and partially undermining efforts for strategic autonomy.

New Models Are Rewriting the Rules of the Game

But outside the transatlantic axis, other models are rewriting the rules of the game, offering alternative visions for the future of digital money.

China: Centralized Control with the e-CNY

China launched the e-CNY some time ago, a fully operational central bank digital currency (CBDC) in various cities and scenarios. Its objective is clear: to strengthen internal control over the financial system, but also to project monetary power globally, particularly in countries involved in the Belt and Road Initiative, bypassing dollar-based SWIFT networks. The risk, of course, is that of a highly centralized and surveilled model, which puts citizens' privacy in the background. But the strategic consistency is evident.

India: Public Infrastructure with UPI and the Digital Rupee

India has chosen a different but equally significant path: it has built a public ecosystem for digital payments, the now-famous India Stack, with the UPI (Unified Payments Interface) as its central infrastructure. Instead of relying on big tech, it has focused on interoperability, competition, and universal access, demonstrating that innovation can occur without privatizing money. The Reserve Bank of India (RBI) is experimenting with its CBDC, the Digital Rupee (e₹), which aims to improve existing digital systems, provide a secure cash substitute with offline functionality and programmable payments, and increase financial inclusion. In the meantime, it has already set up a system that works, and it is public.

Brazil: Inclusion and Innovation with PIX and DREX

Brazil is also setting an example. With the PIX system, the Central Bank launched a public infrastructure for instant payments that has revolutionized access to financial services. Now it is working on a CBDC (DREX) that fits into an already mature digital ecosystem, where financial inclusion and public interest have been put at the center. DREX is the Brazilian real in digital format, issued on the Drex platform, for both wholesale and retail transactions, with a multi-layered architecture that reconciles financial intermediation with the efficiency gains of programmability.

The Future is Multipolar

In this multipolar scenario, the U.S. approach seems increasingly anomalous: a driven financialization of the digital, where the State steps aside and lets large companies shape the global monetary infrastructure. It is a choice that favors the dollar's dominance, certainly, but also one that exposes the entire world to new forms of dependence and instability.

Europe must decide whether to remain constrained by the logic of the American market, or to join forces with other countries developing new models to build a third pillar: a more cooperative path to digital currency, aligned with the strategy of digital cooperation. The coming years, particularly the ECB's decision in October 2025 and the planned pilot phase from 2026, will be decisive.

What’s at stake is not just payment efficiency, but sovereignty, stability, and the very nature of money in the 21st century.