Stablecoins are a type of cryptocurrency offering investors price stability. The most popular stablecoins are those backed by the United States dollar
Stablecoins are a type of cryptocurrency offering investors price stability. The most popular stablecoins are those backed by the United States dollar — the world’s leading reserve currency. Others are less popular and not widely used, so many may not have heard of alternatives if they haven’t searched for them.
According to data from the International Monetary Fund, the euro is the world’s second most widely held reserve currency, behind the U.S. dollar and ahead of the Chinese yuan. The euro is the official currency of the eurozone, comprising 20 of 27 member states of the European Union (EU), with over 300 million people using it as their base currency.
In the cryptocurrency space, the euro is widely adopted by cryptocurrency trading platforms serving users in EU countries. Yet when it comes to stablecoins, euro-backed options are not as popular, with the most prominent ones offered by leading stablecoin providers.
Leading euro-backed stablecoins fall behind
The world’s largest stablecoin issuers, Tether and Circle, have euro-backed stablecoins in circulation. Euro Tether (EURT) has over 200 million tokens in circulation but is dwarfed by the U.S. dollar-backed Tether (USDT), with 70.9 billion circulating tokens.
Similarly, Circle’s Euro Coin (EUROC) has nearly 32 million circulating tokens, while its U.S. dollar-backed stablecoin USD Coin (USDC) has a circulating supply of over 42 billion. Cointelegraph reached out to Circle for comment on these figures. The company highlighted EUROC’s growing adoption, with the Nasdaq-listed cryptocurrency exchange Coinbase recently announcing its listing.
Coinbase will add support for Euro Coin (EUROC) on the Ethereum network (ERC-20 token). Do not send this asset over other networks or your funds may be lost. Inbound transfers for this asset are available on @Coinbase & @CoinbaseExch in the regions where trading is supported.
— Coinbase Assets (@CoinbaseAssets) February 21, 2023
EUROC is less than one year old, launching in June 2022. USDC, on the other hand, was launched in 2018 by the Centre Consortium, of which both Circle and Coinbase are founding members.
Speaking to Cointelegraph, Danny Talwar, head of tax at crypto tax calculator Koinly, said that a widely adopted euro stablecoin would be “absolutely” beneficial for cryptocurrency markets, as it could “allow for faster on-ramps and off-ramps to and from exchanges and DeFi protocols.”
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Nevertheless, when looking at the circulating supply of U.S. dollar and euro-backed stablecoins, Talwar said that “demand globally remains for U.S.-dollar-denominated stablecoins, with the euro experiencing heightened volatility over the past 12 months.”
The recent rise in interest rates has sparked concerns over the ability of some eurozone economies to withstand their impact. The European Central Bank has already raised its rate to 2.5%, which remains significantly lower than the current federal funds rate of 4.50% to 4.75% in the United States.
Would a popular euro stablecoin be positive for crypto?
While rising interest rates pose significant risks, they also bring in new opportunities, especially for those with cash lying around. Stablecoin issuers like Tether and Circle back circulating tokens with equivalent reserves, allowing them to benefit from higher rates. While the interest is there, stablecoins only grow if user demand exists.
Speaking to Cointelegraph, a Tether spokesperson noted that a widely adopted euro stablecoin could be positive for the cryptocurrency space, as it “provides a faster, less costly option for asset transfer to anyone with a cryptocurrency wallet.” For Tether, it could “represent another step forward n the journey toward increased financial access.” The spokesperson added:
“Stablecoins demonstrate more and more their usefulness as a store of value, as they provide more stability, a form of remittance, a hedge against central bank policymakers who seek to influence their domestic currencies, and a much cheaper form of accessing financial services.”
Such a stablecoin, the spokesperson said, would reinforce the euro, the same way USDT reinforces the U.S. dollar as one of the most “dominant currencies across the globe.” While introducing an “opportunity for many markets, as it also acts as an on-ramp to the decentralized finance ecosystem.”
They said Tether is more interested in introducing a stablecoin backed by the euro to emerging markets instead of European markets. This is because the firm believes people in emerging markets have a greater demand for stablecoins backed by stable fiat currencies. These stablecoins can help people “protect themselves from high devaluation of their national currency.”
A stablecoin’s usefulness as a store of value, for remittances, and as a hedge against currency devaluation could help it increase financial access for people worldwide and boost demand for…
cointelegraph.com