US crypto firm lists euro-backed stablecoin on Coinbase
Euro Coin (EUROC-USD), a new euro-backed stablecoin issued by USDC (USDC-USD) provider Circle, is set to list on the Coinbase (COIN) cryptocurrency exchange on Wednesday.
The new token will be distributed on the Ethereum network (ETH-USD) and backed by euro-denominated reserves held by US regulated financial entities, such as San Diego-based Silvergate Bank.
Stablecoins such as USDC and USDT (USDT-USD), are paired one-to-one with the dollar and are intended to provide a relatively non-volatile parking space for investor profits, as most cryptocurrencies can be traded for them.
Euro Coin will be backed one-to-one by the Euro (EURUSD=X). It is a crypto-token not to be confused with the actual Euro currency of 20 EU countries that are members of the European Economic and Monetary Union, informally known as the Eurozone.
The new stablecoin moves off the EUROC ticker and joins other euro-backed stablecoins, such as Tether-issued EURt (EURT-USD). Tether is also the issuer of the largest dollar-pegged stablecoin USDT.
Read more: Crypto: Stablecoins Will Not Meet Global Standards, Financial Stability Board Warns
“Designed for stability, Euro Coin is 100% backed by euros held in euro-denominated bank accounts, so it can always be redeemed 1:1 for euros,” Circle said.
A widely used euro stablecoin held in the US could pose a problem for the European Union’s ambitions to roll out its own central bank digital currency (CBDC). Circle’s euro stablecoin is completely outside the control of European money management, and is allocated and regulated by the United States.
Euro Coin backed by full reserves held by US regulated entities
Circle has said that the euro coin will be regulated by standards set by the American Institute of Certified Public Accountants (AICPA).
The company claims that the stablecoin’s euro reserves will be greater than the amount in circulation each month.
Headquartered in Boston, Circle has a close relationship with US regulators. It claims on its website: “Circle is working closely with US congressional leaders to align the open values of web3 with the traditional financial system and help create our harmonious, interconnected future.”
Read more: What is the digital pound and when can you expect it?
In 2022, the firm’s co-founder Jeremy Allaire told the US Congress: “We have wanted to walk through the front door on new political and regulatory priorities, always focusing on how to appropriately stimulate competitiveness, user protection and regulatory clarity in the new. digital assets economy.”
A widely used euro stablecoin held in the US could pose a problem for the European Union’s ambitions to roll out its own central bank digital currency (CBDC). Circle’s euro stablecoin is completely outside the control of European money management, and is assigned and regulated by the United States.
The European Union is currently developing a CBDC for the Eurozone economies, which will be operated directly from the European Central Bank (ECB).
This differs from euro-backed stablecoins that are issued by third parties in jurisdictions outside of Europe, such as Hong Kong for Tether’s euro stablecoin, and the United States for Euro Coin.
In 2022, the ECB issued a paper warning about “potential risks to financial stability arising from stablecoins”.
“The speed and cost of stablecoin transactions, as well as their redemption terms and conditions, fall below what is required of practical means of payment for the real economy,” the paper said.
It added that stablecoins must be brought under the EU’s proposed Markets in Crypto-Assets Regulation (MiCA), the EU’s bloc-wide effort to bring stablecoins and cryptoassets under regulatory control.
The ECB said that European banks and financial institutions may also be interested in issuing stablecoins or providing related services when the MiCA regulation comes into force in 2023.
Read more: Crypto: Will UK Banks Adopt CBDCs and Stablecoins?
Head of fintech at the Bank of England Varun Paul told Yahoo Finance UK that UK commercial banks will soon start issuing their own sterling-backed stablecoins.
In both of these cases, the issuing entity will be a commercial bank that has a direct relationship with a national central bank.
Adrian Ip, CEO of Aquis Exchange, spoke about the challenges faced by any third-party entity issuing a fiat currency-backed stablecoin, such as Circle’s Euro Coin.
“Any private company that attempts to run a stablecoin based on a fiat currency without official approval will always struggle in the long term for credibility. A private company can always make decisions that may be opaque to the general market and although it may have high standards to begin with that these can slip. It is much more difficult for central banks to change standards without government and public insight.
“I think most major global central banks will introduce their own digital currencies that will eventually replace independent stablecoins simply due to mass market adoption. In the meantime, they will look to hedge against consumer harm and maintain control where possible.”
Coin base to list Euro Coin
Coinbase announced its listing of Euro Coin on Twitter. It is expected to be made available on the stock exchange at 9 a.m. Pacific Time (PST) on Wednesday.
The coin will be listed on the Ethereum network as an ERC-20 token and will launch under the exchange’s “experimental asset” label.
Circle is backed by Fidelity and BlackRock
Circle also has a close relationship with US-based fund managers and investment management companies such as BlackRock (BLK), Fidelity Management and Research and Fin Capital.
In April 2022, Circle agreed to a $400 million funding round, with fund manager Fidelity as one of the biggest backers.
Also in 2022, the world’s largest investment management company BlackRock, with $10tn in assets, entered into a strategic partnership with Circle to be its primary asset manager of USDC cash reserves and explore capital market applications for its stablecoin.
Allaire told TechCrunch: “Our broader strategic partnership with BlackRock will allow us to explore new use cases where USDC can be an effective resource in the financial services value chain.”
EU plans capital requirements for institutions to hold crypto assets
The European Commission (EC) has called on the EU’s European Banking Authority to quickly adopt strict capital standards for financial institutions that hold crypto-assets, while drafting banking laws.
It said the capital requirements for institutions holding crypto assets, including bitcoin (BTC-USD) and stablecoins, should be established by January 2025.
Read more: Crypto prices rise due to China interest rate hike halt
The new law will provide guidance for financial institutions handling crypto-assets.
“Currently, banks have very low exposures to cryptoassets and only a limited engagement in providing cryptoasset-related services,” the EC said in an informal discussion document seen by Reuters.
“Banks have expressed interest in trading cryptoassets on behalf of their clients and in offering cryptoasset-related services.”
