Meanwhile, the European Union has recently proposed a comprehensive regulation called the Markets in Crypto-Assets (MiCA). MiCA aims to offer legal certainty and consumer protection for crypto-asset issuers and service providers.
The euro stablecoin market is poised to expand in the coming years, according to Patrick Hansen, European Union strategy and policy director at Circle. Hansen noted this while speaking at the EthCC conference in Paris on Monday, July 17. Circle currently has one of the top 5 Euro-pegged stablecoins, the Euro Coin (EUROC). The firm will also be looking to grow its market share.
A Dollar-Dominated Market
According to Hansen, the stablecoin market is currently worth about $120 billion. However, euro stablecoins have a meager market share of about $300 million. This represents barely 0.3% of the entire stablecoin market.
At first glance, this may seem like the norm because the US dollar is the most-preferred currency by central banks for trading. However, the Euro is worth up to 20% of the traditional money market. This suggests the euro stablecoin market has more potential for growth. Hansen believes the stablecoin market is dominated by the dollar because it began with the US dollar. Hence, the dollar-pegged assets have been able to gain a first-mover advantage.
Armin Schmid, Head of Pay & Stablecoins at Bitcoin Suisse AG also opined that the dollar-pegged stablecoins are preferred due to the negative interest rates and regulations attributable to the Euro. This, Hansen explained, is because “Liquidity begets liquidity”. With lower liquidity in the market, euro stablecoin users face higher risks and usage costs.
Regulatory Clarity and Real-World Use to Aid Euro Stablecoin Market Growth
As the crypto market transitions from mere speculation to real-world utility, Hansen expects the use of stablecoins to grow. Already, there are calls to begin using stablecoins in remittances and business-to-business transactions. There are also calls to integrate euro stablecoins into existing European payment systems. Hansen believes this will make users demand stablecoins in their local currency.
Again, decentralized finance uses like mortgage payments and car loan payments will need to be delivered in local currency. Hansen argued this should increase the size of regionalized liquidity pools and boost the euro stablecoin market.
Meanwhile, the European Union has recently proposed a comprehensive regulation called the Markets in Crypto-Assets (MiCA). MiCA aims to offer legal certainty and consumer protection for crypto-asset issuers and service providers. Per the framework, MiCA considers payment stablecoins as a means of payment, similar to traditional fiat currency and electronic money.
While they will be subject to more stringent rules and supervision than other crypto-assets, the clarity will help many crypto firms. When the framework kicks off in 2024, it will create a harmonized and innovation-friendly environment that can boost the euro stablecoin market.