Are euro stalls like Euroc a mainstream?

Nevertheless, Patrick Hansen, expert in EU policy and Crypto Venture Advisor at Presight Capital, believes that the demand for a stable coin is increasing, which makes up to 40 % of the global Swift payments and 20 % of global foreign exchange reserves.

"A widespread and liquid euro stable can enable and improve a variety of interesting applications for European investors and companies: from a more efficient entry/exit to crypto/defi to transfers and B2B payments, a smooth crypto-fx market and much more," said Hansen to block works.

Scholz from Kudona predicts that large crypto players such as circle or bony "may be able to change that, but they will take a few months if not two or three years of the introduction to increase liquidity and acceptance on the defi page".

That would be a turning point for European investors because they are exposed to FX risks (foreign exchange risks) compared to the dollar. So far, the currency of the euro zone has lost 11 % of its value compared to the dollar in 2022, and some analysts predict that the two currencies will reach parity this year.

At the moment, stable coins based on euro are less liquid and "are tend to be sold similar to other risky assets instead of behaving like a vehicles in digital transactions and trade," according to the examination of the ECB. At the same time, the institution admits that a euro stable could support the international profile of the currency.

The normalization of monetary policy can accelerate the acceptance

A crucial question for an issuer of a stable coin based on euro is exactly in the area of ​​responsibility of the ECB. With its deposit rate of -0.5 %, the European Central Bank makes it difficult to maintain a stable coin bound to the euro with full reserves, as the issuers have to pay negative interest on banking deposits.

"Negative interest on banking deposits are among the most important obstacles to the development and growth of stable coins secured by reserves," admitted Hansen.

But negative interest rates will soon be a thing of the past. The ECB announced that it can lift its key interest rate both in July and in September. The deposit will follow, leave the negative area and make it easier to keep large amounts of euro reserves at the bank.

"This will undoubtedly be a decisive change and prerequisite for issuers of euro stable," predicts Hansen.

will the regulation of Euro-coupled stable coins harm or use?

The interest rate increases of the ECB come at a crossroads for European regulation towards crypto. The European Union is about to reach an agreement on markets for crypto-assets (mica), a pioneering law that will shape crypto innovation on the old continent.

"This will undoubtedly have a significant impact on the euro stable market, and I do not assume that most euro stable emitters will be able to cope with the complex mica requirements for the satisfaction of the EU supervisory authority," said Hansen and added: "Those who do this will be benefited from greater institutional trust and acceptance."

The market participants are still waiting for the final version of Mica. "It has not yet been carved in stone, so we have to see the final draft," said Scholz, whose company will be affected by the regulation.

"I am a fan of regulation because the general idea is usually to protect consumers, which is of essential importance in finance."

However, the devil could be in the details. "The question then is what kind of regulation you have and how it is implemented and affects companies. If it is well thought out, innovation enables innovation without being too limited," said Scholz, who not only shares a name with the German Chancellor Olaf Scholz, but is actually his nephew.

Even the ECB, which is part of the financial supervision in the euro zone, has a more likely acceptance of a euro stable in the future.

"Potential risks triggered by a further common introduction of stablecoins can be mastered by the existing supervisory framework of the euros system," concludes the ECB and refers to the expected Mica regulation and the international cooperation in the regulation of crypto systems.