Stablecoin Overview: Circle’s EUROC

Perfect timing

EUROC is not the first stablecoin backed by euros. In terms of adoption, euro-backed stablecoins consist of less than 1% of the total market cap of all stablecoins. There are a few reasons why such assets are lagging behind. First, there have been negative interest rates in Europe for the past decade, discouraging institutions holding large reserves denominated in euros. All tokenized funds like USDT, USDC and now EUROC are fully backed by fiat currency and the companies behind these stablecoins are holding large reserves. Why do we believe that Circle timed the market perfectly? After record inflation in the Eurozone, the European Central Bank finally announced the potential end of negative interest rates. This is a very welcome strategy for a company like Circle to launch its product without suffering negative interest rates. Another reason why Euro stablecoins have not been adopted is the weak performance of the euro against the US dollar. Since crypto markets have no boundaries, traders and investors might prefer holding dollars instead of euros long-term. The third reason why Circle has timed the market perfectly is the expected regulation on stablecoin. After the collapse of Luna/Terra central bankers have highlighted the need for stricter stablecoin regulations around the globe. By launching EUROC early Circle is well prepared for the upcoming regulations. We could expect that there will be future debates between the FED and ECB regarding euro-denominated stablecoins, especially if the reserves are not held in the EU.

Regulatory questions

When the EU’s crypto legislation MiCA comes into force, theoretically, the EUROC will not be used within the European Union as it currently stands. This would mean that EUROC would not be offered to the public in the EU by EU-based exchanges, EU-based banks and EU-based custodians. Circle is most probably aware of the potential issues around MiCA and is working on a plan to adapt to the changing regulatory environment. It is expected that MiCA will most likely come into force at the end of 2023, which gives Circle enough time to adapt.

Other market players

The combined market cap of all euro stablecoins is not more than €250M. Circle’s Euro Coin is not the first one on the market, but it has the potential quickly to become the most significant one.

Top 6 of Euro stablecoins on Coinmarketcap
Figure 1: List of current Euro-denominated stablecoins (Source: coinarketcap.com)

The classification of EUROC according to the ITC:

Figure 2: The EUROC Tokenbase entry (Source: https://itin.itsa.global/H0JTT5CJ0)

References:

The International Token Standardization Association (ITSA) e.V.

The International Token Standardization Association (ITSA) e.V. is a not-for-profit association of German law that aims at promoting the development and implementation of comprehensive market standards for the identification, classification, and analysis of DLT- and blockchain-based cryptographic tokens. As an independent industry membership body, ITSA unites over 100 international associated founding members from various interest groups. In order to increase transparency and safety on global token markets, ITSA currently develops and implements the International Token Identification Number (ITIN) as a market standard for the identification of cryptographic tokens, the International Token Classification (ITC) as a standard framework for the classification of cryptographic tokens according to their inherent characteristics. ITSA then adds the identified and classified token to the world’s largest register for tokens in our Tokenbase.

  • The International Token Identification Number (ITIN) is a 9-digit alphanumeric technical identifier for both fungible and non-fungible DLT-based tokens. Thanks to its underlying Uniform Token Locator (UTL), ITIN presents a unique and fork-resilient identification of tokens. The ITIN also allows for the connecting and matching of other media and data to the token, such as legal contracts or price data, and increases safety and operational transparency when handling these tokens.
  • The International Token Classification (ITC) is a multi-dimensional, expandable framework for the classification of tokens. Current dimensions include technological, economic, legal, and regulatory dimensions with multiple sub-dimensions. By mid-2021, there will be at least two new dimensions added, including a tax dimension. So far, our classification framework has been applied to 99% of the token market according to the market capitalization of classified tokens.
  • ITSA’s Tokenbase currently holds data on over 4000 tokens. Tokenbase is a holistic database for the analysis of tokens and combines our identification and classification data with market and blockchain data from external providers. Third-party data of several partners is already integrated, and API access is also in development.

Remarks

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Circle’s Euro Coin article cover

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International Token Standardization Association

International Token Standardization Association

The International Token Standardization Association (ITSA) is a not for profit organization working on holistic market standards for the global token economy.