Euro (EUR) stablecoins have been steadily gaining popularity in cryptocurrency exchanges, creating a strong presence among crypto traders not only in Europe but also worldwide. This surge in the usage of EUR stablecoins poses a challenge to the dominance of the U.S. dollar (USD) stablecoins in the cryptocurrency market. The growth in the popularity of Euro-backed stablecoins has been fueled by the European Union’s implementation of stricter regulations on the crypto market.
The combined weekly trading volume of Euro-backed stablecoins has consistently surpassed $40 million since March, marking a historic high in terms of volume. This data was highlighted in a report released by Kaiko Smart Data Research on June 10. The report also suggests that the demand for these stablecoins is on the rise in European markets, despite Europe traditionally lagging behind the United States and Asia-Pacific (APAC) regions in terms of crypto trading activities.
MiCa, short for Markets in Crypto Assets, is one of the impending regulatory frameworks in Europe that is expected to have a significant impact on the stablecoin market. As a result of the tightening regulations, cryptocurrency exchanges like Binance have announced plans to restrict stablecoins that do not meet the MiCa standards. Similarly, Kraken has been actively reviewing the compliance of stablecoins with the European Union’s regulations, which may result in the delisting of non-compliant stablecoins for E.U. users.
While facing regulatory challenges, Kraken has specified that there are currently no plans to delist Tether’s USD stablecoin (USDT). However, the company is committed to complying with all legal requirements, as stated by Mark Greenberg, the Global Head of Kraken’s Asset Growth & Management Business. This commitment to regulatory compliance demonstrates the importance of adhering to the evolving regulatory landscape in the crypto market.
Anchored’s AEUR stablecoin has emerged as a significant player in the EUR stablecoin market, capturing over 50% of the total volume since its launch on Binance in December. Despite the rise of Euro-backed stablecoins, USD-backed stablecoins continue to dominate the crypto market, accounting for nearly 90% of all transactions relative to the USD. In contrast, Euro-backed stablecoins hold a modest 1.1% share in terms of EUR transactions, according to data from Kaiko’s report.
Patrick Hansen, the Senior Director of EU Strategy and Policy at Circle, which issues the USDC stablecoin, commented on the growing trend of EUR-denominated crypto transactions using EUR stablecoins. Hansen noted that the current 1.1% figure for EUR transactions is a record high, indicating a positive trajectory for the Euro-backed stablecoin market. He expressed optimism for further growth in the market, especially with the impending application of MiCa regulations, which are expected to enhance the liquidity and volumes of EUR-stablecoins.
Contrary to common misconceptions, the implementation of MiCa does not introduce entirely new regulations for fiat-backed stablecoins. Instead, it reinforces the requirement for stablecoin issuers to be regulated as electronic money institutions (EMIs) under the existing electronic money directive (EMD). Jón Egilsson, the co-founder and chairman of Monerium and former chairman of the Icelandic Central Bank’s supervisory board, clarified misunderstandings surrounding MiCa and stablecoins, emphasizing the importance of regulatory compliance in the crypto industry.
Egilsson highlighted the need for stronger regulatory enforcement in Europe to prevent unregulated fiat stablecoins from being listed on European exchanges. This enforcement is crucial to safeguard the interests of compliant European companies and consumers, ensuring a level playing field in the crypto market. As the European Union prepares to enforce MiCa regulations, compliant stablecoin issuers are expected to gain a competitive advantage over non-compliant entities, driving further growth in the EUR stablecoin market.
In conclusion, the increasing volume of EUR stablecoins and the tightening of crypto regulations in the European Union signify a significant shift in the cryptocurrency landscape. As the demand for Euro-backed stablecoins continues to rise, it is essential for market participants to adhere to regulatory requirements to ensure a transparent and compliant ecosystem. The implementation of MiCa is poised to bring about further growth and stability in the EUR stablecoin market, setting the stage for a more regulated and efficient crypto environment in Europe and beyond.
