Stablecoins are one of the most important parts of the cryptocurrency industry. Not only have stablecoins gained popularity over the years, but they have also improved in use cases, the number of trading pairs, the companies and platforms that offer these services, or the type of them.
However, cases such as TerraUSD (UST) undermine the stablecoin stance. Many believe that stablecoins are an example of a doomed cryptocurrency because of what happened with Luna and UST. However, when done right, stablecoins have the potential to help many traders, investors and crypto enthusiasts hedge risk, realize profits or aid in purchases and payments. That’s what Circle Internet Financial’s new stablecoin is supposed to do.
What is the euro stablecoin EUROC?
Circle, the issuer of the second-largest stablecoin USD Coin (USDC), will issue its own stablecoin that will be 100% backed by cash in euros and government debt in euros. The Euro Coin (EUROC) will be pegged 1:1 to the Euro, so it can be exchanged for Euros. Thanks to this, Circle hopes to bring stability to the financial and cryptocurrency markets in Europe as well as the Old Continent.
These euro-denominated reserves will be held within the United States and monitored under U.S. oversight. It appears that the first company to hold Circle reserves will be San Diego-based crypto-friendly company Silvergate Bank.
Additionally, this stablecoin should give businesses wider access to euro liquidity. Therefore, EUROC can be used for payments, transactions, lending and borrowing. The first version of EUROC will be released on Ethereum as an ERC-20 token during the expected launch on June 30. It is expected that EUROC will subsequently be issued under different blockchains and under different standards.
The Euro Coin to Support the Entire Crypto Industry
As of now, different companies have expressed support for the upcoming stablecoin. These include companies like Binance.US, Bitstamp, FTX, Huobi Global, Ledger, Anchorage Digital or MetaMask Institutional. Furthermore, developers have been able to integrate Euro Coin smart contracts even before the official launch.
“There is clear demand for a digital currency denominated in the euro, the second most traded currency in the world after the dollar.”
That’s a statement from Circle’s co-founder and CEO, Jeremy Allaire. Allaire believes that thanks to the EUR Coin and USD Coin, Circle will help usher in a new era of fast, cheap, secure and interoperable global value exchange.
Problems could arise for EU regulators
USD stablecoins such as Tether, Binance USD or Circle USD Coin are very popular. Well, stablecoins denominated in euros, such as EURt issued by Tether or EURS issued by Status, are rarely known.
As of last week, the entire euro-denominated stablecoin was worth about $130 million, while the dollar-denominated portion of the stablecoin was worth more than $155 billion, an increase of more than a thousandfold. Euro Coin, issued by Circle, could close that gap, as it already controls USDC, a stablecoin and fourth-largest cryptocurrency valued at over $55 billion.
However, it also means that, so far, the EU and European financial regulators in general have not needed to pay much attention to euro-denominated stablecoins. But as big players like Circle enter the euro stablecoin space, regulators will need to take stablecoins more seriously. In particular, since the reserves will be held under the jurisdiction and supervision of local U.S. financial regulators.
As of now, the European Central Bank (ECB) has not issued any statement related to this news, but they are expected to do so soon. This is because of EU legislation, the Market for Crypto Assets (MiCA) should also be approved and implemented in the near future.
“No individual or legal entity may make asset reference tokens available to the public within the consortium, or seek to allow such assets to be traded on cryptoasset exchanges within the consortium, unless the issuer of such asset reference tokens owns an asset referenced through their home country Competent authorities are authorised to do so under Article 19. Only legal entities established in the EU can be authorised.”
Euro coin strengthens case for CBDC?
With the euro zone planning an imminent CBDC (central bank digital currency), regulators are not expected to be happy with Circle’s move. Furthermore, it will only strengthen the case for a digital euro, which means that more politicians may be inclined to vote for a CBDC and try to ban or illegalize stablecoins such as euro coins.
At first glance, the Euro coin may be of great help to European traders and investors, but in the long run it can significantly influence decisions on topics such as CBDCs, their privacy, usability, distribution or issuance. So EUROC will definitely have an impact in several ways.
Conclusion
Without a doubt, EUROC has the potential to be the most interesting euro-denominated stablecoin in the crypto industry as competition is very weak and Circle has impeccable experience in stablecoin issuance. However, it is important to point out that there may be a setup issue in the EU, with a US company regulated in the US issuing a stablecoin in Europe. This is very important not only from the perspective of cryptocurrencies, but also from the perspective of a possible CBDC in the near future.
Please check BingX official website or contact the customer support with regard to the latest information and more accurate details.
BingX official website is here.
Please click "Introduction of BingX", if you want to know the details and the company information of BingX.
Comment by Hans
April 24, 2024
as I am trading here various assets, for me it's the most important feature. i mean, flexibility in tradable markets. i alternate trading styles, meaning that sometimes I trad...