- The European private sector has followed the US in the development of cryptocurrencies and digital assets.
- EURST has been designed to provide stability, full transparency, and 100% reliable fiat reserves, held in an FDIC-insured account.
The development of euro-based stablecoins has lagged behind that of USD stablecoins, but the demand for a euro-based product is increasing. Further growth is both beneficial and inevitable.
Coin Metrics Data compiled by The Block identifies a total USD-denominated stablecoin market capitalization of just over $180 billion. By contrast, euro-based stablecoins do not reach even 1% of this volume.
An irrational disparity
Last year Chainalysis identified Europe has the largest cryptocurrency economy in the world. Coupled with the fact that the eurozone represents one of the largest trading areas in the world, this is further evidence of why the apparent gap between euro and dollar denominated stablecoin products is so shocking.
The growth of the euro-stablecoin is inevitable
It appears that many European participants in the digital asset sector are using USD-based stablecoin products due to their comparatively higher liquidity. However, the liquidity problem is likely to be nothing more than a symptom of the early stage of development of euro-based stablecoins. As the sector continues to overcome this limitation, there are several reasons that will require European market participants to use euro-based stablecoins in the future.
The European private sector has followed the US in the development of crypto and digital assets, which, combined with the remaining strong global dollarization, has resulted in USD-based stablecoins vastly outperforming equivalent USD products. Euro-based stablecoins. However, European financial institutions and institutional investors continue to enter the market, generating growing interest in euro-based stablecoins. With European banks offering custody and trading services for a range of DeFi tokens, this is likely to lead to increased demand for Euro-based stablecoin products. This is particularly true regarding automated trading, with Forex market participants entering DeFi in earnest.
Forcing regulatory change
A key issue in favor of a Euro stablecoin is the fact that DeFi users are subject to FX risk when using a USD stablecoin. Furthermore, the stronger USD stablecoins become, the more disadvantaged Europe becomes, as these products are largely under the supervision and influence of US regulators. This, in turn, would lead to more USD-based activity within the EU, potentially undermining the effectiveness of European Central Bank (ECB) policy.
The stance taken by European regulators on stablecoins has not been particularly positive so far. Despite this conservative regulatory approach, with popular support higher than ever for blockchain-based financial sectors, resistance to this inevitable development will dissipate.
The ECB has been looking for a veto in euro stablecoin projects. However, if the euro continues to be undermined through ever-increasing USD-denominated projects, the market will force the ECB and European policymakers to soften their stance and facilitate euro-based stablecoin products to a greater extent. .
based in the US Wallex is offering a solution to market participants through EURST — its euro-based stablecoin product. According to Simone Mazzuca, CEO and founder of Wallex, on the road to regulation and large-scale institutional adoption, a stable euro currency is needed to bridge traditional finance and blockchain in a compatible way. Mazzuca also points to EURST as a reliable and decentralized method of holding fiat-based assets, while also providing an alternative payment method to SWIFT and SEPA payment systems.
The US-based entity has taken a different approach than other euro stablecoin projects. As Mazzuca points out:
“EURST has been designed as a structure to provide stability, full transparency, and 100% reliable fiduciary reserves, held in an FDIC-insured account. In addition, fiduciary reserves are publicly accessible through live certifications from our auditor. We are working for the 90% of the population that has not yet entered the crypto space, and will, by choosing their reliable EUR stable token.”
In a recent Press conference, ECB President Christine Lagarde expressed her desire to speed up the launch of a central bank digital currency (CBDC) based on the euro. However, when contacting Mazzuca, she pointed out that a Euro CBDC is likely to take quite some time, but the market need is immediate:
“EURST was created at the right time and in the right way, to be the solution to bridge the European economy from the traditional asset space to digital assets, today.”
Europe lost out to the US during the previous Internet-led wave of innovation due to over-regulation. Market demand is likely to force a change, and with that, Euro-based stablecoins are poised for further growth.
This content is sponsored by Wallex.
Get the top crypto news and information of the day delivered to your inbox every night. Subscribe to the free Blockworks newsletter now.