Subscribe to Bankless or sign in
In a year when stablecoin volume surged to nearly $30 trillion, surpassing Visa and Mastercard combined—the European Union is building a digital wallet that can’t hold them.
What is the EUDI Wallet?
The EU Digital Identity Wallet is one of the most ambitious digital public infrastructure projects underway anywhere in the world. Set to roll out across 27 Member States by 2026, it will allow hundreds of millions of citizens and residents to verify who they are, digitally sign contracts, and store credentials like diplomas and health records, as well as handling payments, all from one secure location. It is private, interoperable, and legally binding across borders.
However, while the EUDI Wallet supports payments, it does so only via traditional rails: bank accounts, credit cards, and SEPA transfers, ignoring the growing role of stablecoins and decentralized finance more broadly.
The omission of stablecoins is disappointing given the parallel rollout of MiCA (Markets in Crypto-Assets), the EU’s landmark stablecoin legislation. MiCA introduces strong reserve requirements, audit obligations, and licensing for issuers of tokens. It is one of the most comprehensive regulatory frameworks for crypto assets on the planet, and it creates a clear legal pathway for compliant stablecoins. Yet, the EU has chosen not to prioritize them in its plans here.
In contrast, the U.S.’s recently relaxed approach to regulating crypto assets, and explicit excitement around driving the digital asset revolution is starkly different. SEC Chair Paul Atkins describes America’s approach as “clear and simple rules of the road for crypto asset distributions, custody, and trading.” This approach leaves room for experimentation and rapid product development. The EU, on the other hand, has opted for strict prescriptiveness. By forcing high levels of compliance onto both users and developers, it risks building an overly regulated environment—raising usability issues as well as centralization concerns.
Why Should They Introduce Web3 Composability?
In Web3, the most powerful user experiences happen when three primitives come together:
- Verifiable identity (e.g. over 18, EU resident, KYC)
- Smart contracts (rulesets that live on-chain and execute autonomously)
- Programmable assets (tokens that can move instantly and conditionally)
The building blocks are available, but what’s missing is mainstream integration, and the willingness to use these technologies together. The EUDI Wallet will become an identity pillar in this stack, but without support for programmable assets or integration with smart contracts, it is disconnected from all of the accelerating innovation happening in DeFi.
Right now, it feels like the crypto economy and the rest of the world are moving parallel to each other, but rarely overlapping. Onboarding remains a challenge and crypto applications are mostly siloed within their own ecosystem of tech-savvy early adopters. A general purpose, secure digital wallet like the EUDI wallet would be an excellent first step for enabling citizens to custody their first tokenized RWAs.
The Opportunity Right Now
Despite its limitations, the EUDI Wallet still opens an important door: it makes government-recognized, privacy-preserving identity programmable for the first time at continental scale. And while it doesn’t support tokens or DeFi rails today, the architecture is open and the crypto industry should be taking note.
The EUDI Wallet is built using open standards like verifiable credentials (VCs) and selective disclosure protocols. These are some of the primitives used in many self-sovereign identity projects already underway in Web3, such as 
Polygon ID, World ID, and Rarimo. In other words: the overlap is bullish.
Rather than wait for formal integrations, here’s how crypto wallets and protocols can begin aligning themselves with this emerging identity layer:
- Wallet providers could adopt EUDI-compatible credentials to verify users for certain actions, without collecting their data.
- DeFi protocols could request zero-knowledge attestations that satisfy MiCA KYC requirements, without forcing users to go through centralized onboarding flows.
This is the kind of compliance-native DeFi that crypto has long struggled to build, and more importantly—it positions the crypto ecosystem as a constructive partner in Europe’s digital future. Instead of viewing regulation as a wall to break through, builders can treat the EUDI Wallet as a bridge to millions of verified users, and help shape a future that serves both traditional and open financial systems.
Looking Ahead
The EU has invested significantly in this digital innovation project, but its caution risks leaving a lot of value on the table.
By omitting stablecoins and programmable assets from the EUDI Wallet, Europe risks entrenching a digital finance layer that is quickly becoming outdated. If Europe’s goal is to remain competitive against innovation from other continents, it should be careful about treating crypto assets as an afterthought.
There’s still a relatively promising middle path: using EUDI credentials to verify non-custodial wallets. With EUDI-compliant proofs, EU users could bind a verified identity to a self-hosted crypto wallet, enabling pseudonymous transactions that meet MiCA requirements without surrendering their privacy to application developers. Notably, the wallet does not protect user’s privacy from governments or regulators though, which underscores how the concern that the EU’s vision of digital identity is still rooted in centralized oversight. Still, the wallet could bridge the gap between public infrastructure and open financial networks, allowing DeFi to remain compliant with the existing EU regulation.
Looking ahead further, we’d like to see tokenized assets and smart contract functionality integrated directly into the wallet stack. If the EUDI Wallet is to serve as the backbone of Europe’s digital economy, it should be more forward-thinking than it is at this stage.
The EUDI Wallet has a decent foundation. But that does not matter until it offers access to open and permissionless finance.
