Key facts:
Euro-pegged stablecoins only account for 0.02% of the cryptocurrency market.
Stablecoins are vehicles to access more volatile assets, according to the ECB.
The European Central Bank (ECB) alluded to stablecoins and their role in the world economy in its most recent report on “The international role of the euro”. The document not only talks about stablecoins collateralized with the European currency, but also contrasts their influence against stablecoins based on the US dollar.
Stablecoins (stable cryptocurrencies) are digital currencies whose value is anchored to another asset, which can be fiat currencies, raw materials, etc. These usually take part of the Bitcoin technology in their infrastructure, even if they do not share the ethical principles of the currency created by Satoshi Nakamoto.
Despite the fact that stablecoins have been on the market for more than seven years, the European Central Bank’s distance from everything that has some kind of relationship with Bitcoin has kept them out of reports such as the one cited in this article. Yes ok, comparing any stablecoin to Bitcoin is like comparing apples to oranges.
Whether fiat or crypto, the US dollar continues to outperform the euro
Despite the superiority of the price of the euro over that of the dollar in the foreign exchange market, the ECB report acknowledges that the international use of the USD continues to be much greater than that of the euro.
The distance between USD and EUR in the context of the stablecoin market is even more dramatic. According to the ECB report, 99% of the stablecoin market capitalization belongs to currencies pegged to the US dollar. Among them, the most popular are USDT and USDC, which combined reach a market capitalization of USD 120 billion.
For its part, euro-pegged stablecoins barely reach a market cap of $500 million between them. Its share of the cryptocurrency market is only 0.02%, although this is enough to be in second place in its niche. Stasis Euro (EURS) is the most widely used stablecoin among those pegged to the euro.
The disparity between the US dollar-backed and euro-backed portions of the stablecoin market does not match that of the international market for these fiat currencies. According to the ECB report, the USD has a 59% share of the world’s official foreign exchange reserve holdings; while the euro retains 20.6% of this line.
Stablecoins of the dollar and the euro are not very relevant in traditional finance
For the European Central Bank, cryptocurrencies such as USDT and EURS do not currently represent a useful instrument in traditional finance. Nevertheless, the financial authority recognizes them as tools that intervene in the sale of other cryptocurrencies and similar assets.
“Stablecoins are not seen as a new financial asset class that investors can use for arbitrage against other asset classes, but as vehicles to transact with other more volatile crypto assets.”
European Central Bank.
Despite the observation made by the ECB regarding the relevance of stablecoins in the world economy, having dedicated an entire section of its report about the euro implies that this asset does play a role of some importance in global finance, for better or worse.
In regulatory matters, cases such as that of Terra and the lack of transparency of USDT issuers regarding the distribution of the funds with which they back their assets put pressure on the authorities to keep a close eye on stablecoins.
CriptoNoticias recently reported the measures that are being taken in various countries for the regulation of different stablecoins. In Japan, for example, a law has already been passed that classifies stablecoins as digital money., therefore, they can only be issued by licensed entities.
Europe, for its part, has been preparing a regulatory law for cryptocurrencies in which they plan to condition the issuance of stablecoins., just like in Japan. In addition, companies in the cryptocurrency industry will have to have physical headquarters in European territory to be able to operate there.