Euro Stablecoin Market to Expand with Real-World Use Cases and Clear Regulations

Euro Stablecoin Market to Expand with Real-World Use Cases and Clear Regulations

The Growing Potential of the Euro Stablecoin Market

The euro stablecoin market is expected to see significant growth in the coming years, according to Patrick Hansen, the European Union strategy and policy director at Circle. Speaking at the EthCC conference in Paris, Hansen highlighted the current state of the stablecoin market and the potential for expansion.

A Dollar-Dominated Market

Currently, the stablecoin market is valued at approximately $120 billion, with euro stablecoins accounting for a mere $300 million, representing only 0.3% of the entire stablecoin market. While this might seem unsurprising given the US dollar’s dominance in central bank trading preferences, it is worth noting that the euro holds a substantial 20% share of the traditional money market. This suggests that the euro stablecoin market has untapped potential for growth.

Hansen attributes the dominance of dollar-pegged stablecoins to their first-mover advantage. As the stablecoin market originated with the US dollar, these assets were able to establish themselves early on. Additionally, Armin Schmid, Head of Pay & Stablecoins at Bitcoin Suisse AG, believes that negative interest rates and regulations associated with the euro have made dollar-pegged stablecoins more attractive. This is due to the concept of “liquidity begetting liquidity.” Lower liquidity in the euro stablecoin market leads to higher risks and usage costs for users.

Regulatory Clarity and Real-World Use to Drive Market Growth

As the cryptocurrency market transitions from speculation to real-world utility, the use of stablecoins is expected to increase. There are already calls to adopt stablecoins for remittances and business-to-business transactions. Moreover, integrating euro stablecoins into existing European payment systems could further drive demand for stablecoins in local currencies.

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Decentralized finance applications, such as mortgage and car loan payments, will also require settlement in local currencies. This, in turn, will contribute to the growth of regionalized liquidity pools and boost the euro stablecoin market.

Regulatory clarity is another crucial factor that will aid the growth of the euro stablecoin market. The European Union has proposed a comprehensive regulatory framework called the Markets in Crypto-Assets (MiCA). This initiative aims to offer legal certainty and consumer protection for crypto-asset issuers and service providers. Payment stablecoins will be classified as a means of payment, similar to traditional fiat currency and electronic money, and will be subject to more stringent rules and supervision.

The implementation of the MiCA framework, scheduled for 2024, will create a harmonized and innovation-friendly environment that can significantly boost the euro stablecoin market.

Conclusion

The euro stablecoin market has immense potential for growth, considering the euro’s significant share in the traditional money market. While dollar-pegged stablecoins currently dominate the stablecoin market, the introduction of regulatory clarity and the increasing real-world use of stablecoins will drive the demand for euro stablecoins. Integration with existing payment systems and the adoption of stablecoins for decentralized finance applications will contribute to the growth of regionalized liquidity pools. As the market transitions into a more regulated and utility-focused environment, the euro stablecoin market is poised to expand and establish itself as a prominent player in the blockchain industry.