Circle’s New Euro-backed Stablecoin Mimics USDC

Europe is bidding adieu to negative interest rates — and a euro-backed stablecoin is vying to be a prime beneficiary. 

Seizing the development in monetary policy, USDC’s issuer, Circle, announced Thursday a new euro-backed stablecoin called EUROC, modeled after the second-largest dollar-pegged stablecoin, which currently has a market cap of $54.4 billion. 

The plan is for Euro Coin to be backed 100% by euro-denominated reserves held in Silvergate Bank, regulated in North America, so it is redeemable 1:1 for euros. The reserves will grow based on supply and demand. 

“Euro Coin expands opportunities for payments, on-chain FX, trade finance, commerce, and broader digital asset markets use-cases. The launch is symbolic of a shift in crypto markets towards greater and greater utility value from blockchain infrastructure,” Circle’s co-founder and CEO, Jeremy Allaire, wrote in a tweet. 

The euro, shared by 19 European Union member states, is the second-largest currency in the world, just behind the US dollar, but has an insignificant representation in stablecoins. So far in 2022, the eurozone’s currency lost 11% of its value against the dollar, and some analysts predict the two currencies will reach parity later this year.

Until now, only a few stablecoins are pegged to the euro, such as Tether’s EURt — a sister stablecoin to the largest dollar-backed issue, USDT — or Stasis’ EURS. Far from the scale of dollar-pegged stablecoins, EURt has a market cap of roughly $216.1 million and EURS’ market cap sits around $130 million, according to CoinGecko.

Asked whether the launch is linked to the European Central Bank’s decision to raise the benchmark interest rate in July and September out of negative territory, a Circle spokesperson told Blockworks that the company “builds for the long term.”

“There is a clear need for a credible, sound, and regulated euro-backed stablecoin to play a role in the future of finance,” the spokesperson said.

However, on EUROC’s website, Circles addresses the issue: “How do negative eurozone interest rates impact Euro Coin? Circle assumes the interest rate risk on Euro Coin reserves, just as we do with USDC,” the company says. 

The new token will be available for everyone June 30. EUROC will launch on the Ethereum blockchain as an ERC-20 standard token — additional blockchains will be added later this year. USDC similarly began on Ethereum and has since expanded to eight other chains.

“A number of ecosystem leaders will support Euro Coin at launch, including Anchorage Digital, Binance.US, Bitstamp, Compound, Curve, CYBAVO, DFX, Fireblocks, FTX, Huobi Global, Ledger, MetaMask Institutional, and Uniswap Protocol,” the statement said. 

EUROC reserves will be audited and attested monthly by Grant Thornton, a US independent auditor, starting in July.

Asked whether the stablecoin will be compliant with future European regulation once MiCA (Markets in Crypto-Assets) framework is approved by the EU, a Circle spokesperson responded, saying that EUROC will be initially issued “within the US regulatory perimeter, with euro-denominated reserves held by US-regulated financial institutions.”

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