Nine major European banks are collaborating to launch a euro-based stablecoin, aiming to counter the dominance of dollar-linked tokens in global markets. The move reflects growing concern that dollar-backed stablecoins could further erode the euro’s role in international trade and the wider digital economy.
Dollar-pegged assets, such as USD Coin (USDC) and Tether (USDT), still dominate the sector, powering most cryptocurrency exchanges, remittances, and decentralized finance (DeFi) activities. By contrast, euro-backed stablecoins account for only a fraction of market value and trading volume, despite the euro being the world’s second most traded currency.
According to Bloomberg, the banks aim to change that with a unified framework for a fully euro-backed, regulated stablecoin. Beyond settlement for crypto exchanges, the project is designed to support euro-denominated payments across both traditional finance and digital platforms.
Strategic Reaction to Worldwide Shifts
While financial institutions worldwide are seeking alternatives due to geopolitical shifts, regulatory reorganizations, and discussions around central bank digital currencies (CBDCs), a euro-pegged stablecoin has emerged.
To ensure that the common currency remains relevant in the digital realm, the private sector proposal serves as a stopgap measure while the European Central Bank (ECB) continues to discuss the introduction of a digital euro.
Executives involved in the creation have cited currency competitiveness as a motivating factor. Businesses based in the euro risk significant conversion fees and exchange rate vulnerability, as many stablecoin transactions worldwide default to the dollar.
A standardized and widely used euro-denominated token could not only strengthen Europe’s strategic independence but also reduce reliance on dollar liquidity.
Regulatory Considerations for the Stablecoin
The stablecoin is anticipated to be structured by banks according to a fully collateralized model, where each token is backed one-to-one by euros held in regulated accounts. This system is similar to that of top-dollar stablecoins, but it incorporates the European Union’s legislative framework, particularly the recently enacted Markets in Crypto-Assets (MiCA) law.
European institutions and domestic authorities must approve the project if it complies with MiCA. The legislation requires stablecoin issuers to adhere to stringent reporting, reserve management, and transparency standards.
The support of well-known banks aims to address concerns over solvency and confidence that have previously plagued smaller euro stablecoin initiatives.
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