- Euro-backed stablecoins are lagging behind USD stablecoins.
- New EU digital asset laws spur Euro stablecoin growth.
- Tempo France predicts increased blockchain integration in the EU.
Stablecoins have seen a huge expansion, both in terms of crypto dominance and payments volume. Still, Euro stablecoins are lagging behind, with a significantly lower share than their USD counterparts. Moreover, recent European regulatory shifts have created anxiety over the future of stablecoins in Europe.
However, Tempo France, a fintech company and payment operator, sees it differently. They project a substantial growth in the circulation of Euro-backed stablecoins. This development could shift the balance of power within the global stablecoin market, traditionally dominated by the U.S. dollar.
Euro Stablecoins Set for Substantial Rise: Tempo France
According to fintech company Tempo France, Euro-backed stablecoins are set to explode in the coming years.
Specifically, the firm projects that the share of Euro-backed stablecoins in the overall fiat Euro circulation is expected to reach 0.5% over the next three years. This is a huge increase from their current share of just 0.007%. Moreover, Tempo expects a further rise of Euro stablecoin share to 1% over the next five years. These figures would help Euro stablecoins catch up to their USD counterparts.
Currently, USD-pegged stablecoins, such as Tether, USD Coin, and Binance USD, dominate the stablecoin market. They also account for approximately 75% of crypto trade volumes globally.
In addition, USD-backed stablecoins have a much more significant share of the fiat USD circulation. Specifically, according to data by Tempo, USD-backed stablecoins account for 0.7 percent of circulation, or over $130 billion.
Factors Driving Euro Stablecoin Growth
This growth projection for Euro stablecoins is based on several factors. Tempo claims that the European Union’s recently adopted regulations for digital assets provide a more structured and supportive environment for the growth of crypto assets.
Central Bank Digital Currency (CBDC) initiatives in Europe are also crucial. These initiatives, aiming at modernizing financial infrastructures, are expected to positively impact the stablecoin market, particularly those pegged to the Euro. The synergy between CBDCs and stablecoins could pave the way for more innovative and secure financial solutions.
Moreover, European institutions are increasingly integrating blockchain technology into their operations. Tempo France expects this trend to continue, forecasting a 30% rise in financial institutions using blockchain in 2024.
Major players in crypto are also exploring the potential of Euro stablecoins. In June 2022, Circle launched its Euro-backed stablecoin Euro Coin (EUROC). Moreover, Binance revealed in July 2023 that it is exploring its own Euro-backed stablecoin.
On the Flipside
- Finding a bank partner in Europe for crypto-related transactions remains a significant hurdle. Regulatory concerns make it challenging for crypto companies, including stablecoin issuers, to open bank accounts and develop their business.
- Upcoming EU regulations are expected to be strict for stablecoin issuers and service providers. This will impact the growth and operations of Euro-backed stablecoins.
Why This Matters
The rise of Euro-backed stablecoins introduces vital diversification to the global stablecoin market, traditionally dominated by the US dollar. It also gives European users a more convenient option to move digital assets.
Read more about Circle’s Euro Coin:
Stablecoin Dominance Wanes: Will MiCA End Them?
Read more about OKX’s launch in Brazil:
OKX Taps Into Brazil’s Vast Potential with Exchange Launch