The fall in the prices of crypto-assets makes the ink flow and hide the news, which, nevertheless, should mobilize all of us much more than another episode in the stock market. On June 16, the American company Circle, the world’s second largest issuer of stable crypto assets (stablecoins), announced the launch of EUROC, a crypto asset backed by the euro.
The announcement is all the more significant as it highlights two major shortcomings: the lack of marketable euro stablecoins and the lack of European players to issue them. Therefore, Circle is rushing into this gap, following the global leader Tether, which has already disclosed its EURT in 2021. So I’m talking to decision makers. How many years and foreign crypto euros will pass before Europe decides to reward its champions?
Because while some still limit cryptography to volatile entities untrustworthy, stablecoins, whose value is maintained at a fixed parity thanks to currency, are becoming a key tool in this new economic universe. Between the unprecedented replication of digital means of payment and the creation of new economic spaces such as finance without intermediaries, they open the way to many uses that will make our daily lives easier.
Let’s not make mistakes with the enemy. Let’s stop the amalgams. Not all stablecoins will fail because Terra’s failure with UST made headlines. First, for technical reasons, because their stability can be achieved in many ways. Some, such as Circle, place an equivalent amount of currencies in reserve for each stablecoin issued. Others, such as Terra, program an algorithm to maintain this stability.
On the other hand, for management reasons. Terra’s falsely decentralized decision-making mechanism is at the root of UST’s lack of collateral, which led to its price collapse. Other more decentralized stablecoins weathered this stock market crisis. Therefore, we cannot hide behind this event to brush off the implications of Krug’s statement and at the same time write off the future of our monetary sovereignty.
The relevance of the growth of a reliable business
The European rules to be adopted cannot be based solely on a failed company. And not be the only reflection of conservatism, which ultimately runs counter to our common goal: to preserve the economic and monetary power of Europe. Because if the European Central Bank thinks well about the digital euro issue, its release is only expected in a few years, and the properties that will be transferred to it are far from the innovation and flexibility promoted by private actors.
This observation should confirm the relevance of promoting the development of reliable and secure companies that will meet the expectations of users in accordance with European policy. Moreover, encouraging the development of stablecoins would allow us to establish the dominance of the euro in international trade.
Otherwise, we expose ourselves to a serious threat. The United States will issue the euro of the digital world instead of us. However, more than 99% of the stablecoins in circulation are already pegged to the dollar. Thus, American monetary hegemony is in the process of being recreated on the Internet3 and therefore in the economy of tomorrow. Here’s what’s at stake. Cryptocurrencies are the fundamental building block of the emerging digital economy. A pillar of Web3, their ambition is simple but powerful: to allow everyone to own and exchange value or rarity online (from coins to art).
Protect citizens from failure
However, Europe is not betting on euro stablecoins. This is evidenced by the draft European regulation MiCA, which is going to prohibit our companies from issuing euro stablecoins in excess of 200 million euros and one million transactions per day. How then to compete with dollar-denominated stablecoins that circulate up to $69 billion for USDT and $55 billion for USDC.
By choosing this path, we can be proud of our rules, which are certainly innovative, but which will bury hope for the renewal of European economic power on an international scale, especially in the digital sector. Worse, the current rules will not be able to protect European citizens from the potential failures of foreign players, who themselves will be able to provide them with euro stablecoins without restrictions.
There is still time to react! To strengthen our sovereignty, protect users, protect the environment and fight financial crime, we need to have companies in Europe that will carry our values.
Faustine Fleuret, President and Managing Director of ADAN