Euro (EUR) stablecoins are increasingly popular in cryptocurrency exchanges and among traders in Europe and worldwide. This rise could challenge the dominance of U.S. dollar (USD) stablecoins in the cryptocurrency market, driven by the European Union’s stricter regulations.
Since March, the weekly volume of Euro-backed stablecoins has consistently exceeded $40 million, marking the longest period on record. This data comes from a Kaiko Smart Data Research report published on June 10.
Interestingly, the report indicates that demand for these stablecoins is finally gaining traction in European markets, despite Europe traditionally lagging behind the United States and the Asia-Pacific (APAC) region in crypto trading.
Average Daily Volume of EUR Trading Pairs. Source: Kaiko
### MiCa and Regulatory Changes in Europe
The upcoming Markets in Crypto Assets (MiCA) regulation in Europe is set to transform the stablecoin market.
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Binance recently announced plans to restrict stablecoins that do not comply with MiCA standards. Meanwhile, Kraken is actively reviewing which stablecoins meet the European Union’s requirements, potentially leading to the delisting of non-compliant stablecoins for their E.U. users.
Despite these regulatory challenges, Kraken has no plans to delist Tether’s USD stablecoin (USDT) at this time, according to a Finbold report. Mark Greenberg, Global Head of Kraken’s Asset Growth & Management Business, stated that Kraken will follow all legal requirements.
> Let’s be clear: @krakenfx continues to list USDT in Europe and we have no plans to delist at this time. We know our European clients value access to USDT and we continue to look at all options to offer USDT under the upcoming regime. We will of course follow all legal requirements.
> — Mark Greenberg (@marklg) May 18, 2024
### EUR-Backed Stablecoins on the Rise, Still Behind USD’s
Anchored’s AEUR has made a significant impact on the EUR stablecoin market, commanding over 50% of the total volume. This EUR-backed stablecoin was launched on Binance in December.
Despite this, USD-backed stablecoins continue to dominate the crypto market, accounting for nearly 90% of all transactions executed relative to the USD. In contrast, Euro-backed stablecoins have only a 1.1% share against the EUR, according to Kaiko’s report.
Stablecoin vs. Fiat in 2024. Source: Kaiko
Patrick Hansen, Senior Director of EU Strategy and Policy at Circle (issuer of the USDC stablecoin), commented on the Kaiko report. He noted that the 1.1% figure for euro-denominated crypto transactions using EUR-stablecoins is an all-time high. In a June 13 X post, Hansen shared his outlook for the stablecoin market in Europe.
> “It was basically zero a few years ago. If you ask me, it will only continue to grow from here, and MiCA’s entry into application will contribute to creating more attractive EUR-stablecoin liquidity and volumes. Let’s check again in 6-12 months.” – Patrick Hansen, Circle
### MiCa and EUR Stablecoins
It’s important to note that MiCA does not introduce entirely new regulations for fiat-backed stablecoins. Instead, it confirms that stablecoin issuers must be regulated as electronic money institutions (EMIs) under the existing electronic money directive (EMD).
Jón Egilsson, co-founder and chairman of Monerium and former chairman of the Icelandic Central Bank’s supervisory board, clarified misconceptions about MiCA and stablecoins in CoinDesk’s Consensus Magazine on February 6.
> “The EU’s comprehensive crypto guidance does not introduce entirely new regulations for fiat-backed stablecoins. Instead, it affirms existing rules that many current issuers are not yet following.” – Jón Egilsson
Egilsson also warned that the lack of regulatory enforcement in Europe has allowed unregulated fiat stablecoins to be listed on European exchanges, disadvantaging compliant European companies and putting European consumers at risk. The practice of U.S. issuers employing a “break things first, fix later” approach creates an unfair competition dynamic.
As the European Union prepares to implement MiCA later this year, the EUR stablecoin market is likely to continue growing. Compliant issuers will potentially gain an advantage over those operating without the necessary e-money licenses, Egilsson concluded.
