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The second stablecoin for Circle, after USD Coin
Fully secured by reserves in euro, no speculative part
Does the token conflict with EU cryptocurrency regulations?
As Tether comes under increasing pressure, Circle is gearing up to launch a new stablecoin.
After the US stablecoin USDC, the EUROC token is Circle’s second digital currency. The company took notice earlier this year when it doubled in value with a SPAC deal, according to BTC-ECHO.
Circle’s first stablecoin, USD Coin, is the fourth largest cryptocurrency with a market capitalization of $ 55.7 billion, according to CoinMarketCap data, just behind Tether at $ 66.9 billion (as of 06/23/2012). And like its American counterpart, the company relies on full hedging with no speculative element.
The company announced the launch of the Ethereum blockchain on Twitter.
1 / Get ready for #EuroMoneta!
The Euro coin (EUROC) is our newest #stable coin which will start on June 30.
We designed it with the same full reserve model as #USDC so that it is always convertible 1: 1 to euros. See how to get it https://t.co/3PclycHxPk
– Circle (@circlepay) June 16, 2022
The launch of the euro coin is intended to “continue the successful work of Circle in promoting a fluid exchange of financial assets and combining crypto and traditional financial services,” according to the company’s press release.
Increased demand despite shaky confidence
Circle CEO and co-founder Jeremy Allaire sees “clear market demand for euro-denominated digital currency, the second most traded currency in the world after the US dollar.” With two stablecoins, Circle contributes to a fast, inexpensive, secure and interoperable exchange of value around the world.
The defeat of Terra severely damaged investor confidence in stablecoins. The TerraUSD crash caused shocks in the cryptocurrency market. Mass sales upset the TerraUSD balance, causing it to become unstable against the US dollar. As the decentralized stablecoin was linked to the LUNA token, LUNA coins had to be massively sharpened to stabilize the UST.
The basic algorithm caused the system to crash. Investors panicked and put tremendous pressure on veterans of cryptocurrencies such as Bitcoin and Ethereum.
Not all stablecoins are created equal: the EUROC token
However, there are significant differences in the security of stablecoins: EUROC will not be the first stablecoin linked to the common currency and as such belongs to the group of the so-called stablecoins secured by fiat. Unlike algorithmic stablecoins like TerraUSD or cryptocurrency stablecoins, it is fully backed by the common European currency (cash and government bonds). Such a stablecoin is not risk-free, but is the lowest risk representative in its class.
As a result of the disaster, Terra Tether also briefly lost its position against the US dollar. As the example of Tether shows, there are definitely doubts about this security strategy: in the past, there was no 100% coverage for all stablecoins issued all the time, publisher Tether awarded the New York State Attorney General, t3n reports. In the future, however, quarterly tethering disclosures will become mandatory.
Well known in the cryptocurrency world, Silvergate Bank will hold the reserve “within the US regulatory framework,” the company said. Initially, the token is scheduled to run on the Ethereum blockchain, but the list of supporters posted on the Binance.US, Bitstamp, FTX, Huobi Global homepage suggests that stablecoin will be traded on well-known cryptocurrency exchanges in the near future.
EU Cryptocurrency Regulation Act: MiCA
In parallel with the launch of the EUROC token, the European law regulating MiCA cryptocurrencies is to be completed, which may also provide strict regulations for stablecoins. As Blockchainwelt writes, citing a stablecoin expert in contact with EU regulators, the new stablecoin can be seen as an affront while circumventing foreign currency regulations as it is issued under the US dollar. There is a reasonable assumption that stablecoins will play a role in MiCA, as the Vice-President of the European Parliament, Eva Kaili, has already made the relevant statement.
Editors of finanzen.net
This text is for information purposes only and does not constitute an investment recommendation. Finanzen.net GmbH excludes all recourse claims.
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