Amidst tighter cryptocurrency regulation within the European Union, Euro (EUR) stablecoins are witnessing an unprecedented spike in popularity. A burgeoning demand in cryptocurrency exchanges and from traders both within Europe and globally is now challenging the long-standing dominance of U.S. dollar-denominated stablecoins in the digital currency market.
A recent report by Kaiko Smart Data Research indicates that the weekly trading volume of Euro-backed stablecoins has surpassed $40 million—a historical streak since March. This notable increase symbolizes traders’ and investors’ heightened interest in diversifying their stablecoin holdings beyond the predominant U.S. dollar options available.
The Spanish financial markets are on the brink of potentially transformative regulation with the Markets in Crypto Assets (MiCA). The impending regulatory framework is anticipated to significantly alter how stablecoins, among other crypto assets, operate. Major exchanges like Binance and Kraken are already scrutinizing their offerings to ensure compliance with MiCA.
A prime example of the rise in Euro-centric stablecoins is Anchored’s AEUR, which has seen a massive uptick in its share of total stablecoin volume. It now commands more than 50% of the market within this specific category, a testament to its growing acceptance among crypto enthusiasts.
Despite this surge, USD-backed stablecoins remain the bedrock of the market, representing nearly 90% of all stablecoin transactions. In contrast, Euro-backed variants only constitute a meager 1.1% market share against the EUR. However, per Circle’s Senior Director of EU Strategy, Patrick Hansen, even this small percentage reflects a significant milestone, marking the highest utilization of Euro-denominated crypto transactions with Euro-backed stablecoins to date.
MiCA does not propose entirely new regulations for fiat-backed stablecoins but asserts that stablecoin issuers should be governed as electronic money institutions within existing legislative structures. This reinforcement of regulatory compliance could adjust the playing field, providing compliant operators with an edge over those that are not.
Jón Egilsson, co-founder of Monerium, underlines that the current lack of regulatory action in Europe has permitted the listing of unregulated fiat stablecoins on European exchanges. This has inadvertently placed compliant companies at a disadvantage by allowing non-compliant actors to operate more freely.
As the European Union moves forward with the implementation of MiCA, the landscape for Euro-backed stablecoins looks favorable. The focus on conformance might just unlock new advantages for those who adhere to regulatory standards, potentially bolstering the growth of this emerging market and paving the way for a more stable and regulated European cryptocurrency ecosystem.
