Euro stablecoin push runs into thin liquidity
YO’s new yoEUR vault lands as incentives try to pull EURC onchain, but fragmented bridges and caps keep markets segmented
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YO, short for Yield Optimizer, launched a yoEUR vault on Friday, adding fresh momentum to the euro stablecoin trade. But market infrastructure still lags behind. Cross-chain liquidity for Circle’s EURC is limited, causing distortions in interest rates on borrow and lending markets not seen with larger USD-pegged stablecoins.
yoEUR is a multichain yield vault designed to optimize returns on EURC. Like YO’s earlier offerings, covering ETH, BTC and USD, the vault allocates capital across multiple chains and strategies using a risk-adjusted framework.
The “yoTokens implement the ERC-4626 tokenized vault standard, with key additions to support a multi-chain architecture,” YO Labs CEO Driss Benamour told Blockworks. “YO deposits are currently on Base, with one-click deposits supported from multiple chains, including Arbitrum, via integrated routing and bridging. YO actively harvests yields across multiple chains, including Ethereum, Base, and Unichain, with Arbitrum coming soon.”
Asked about visibility into yield positions, Benamour said: “All YO strategies are fully transparent and accessible on the dApp…Users can always track exactly where their assets are allocated via the dApp.”
The launch comes as euro-denominated stablecoins inch further into the DeFi spotlight, thanks to a dollar weakness. The greenback has been ranging over the summer, but is down roughly -12% against the euro year-to-date.
On Solana’s Jupiter Lend kicked off a two-month incentive program pushing posted EURC APYs above 7%.
Aave founder Stani Kulechov has repeatedly promoted ~5% lending yields on EURC via Aave deployments on Base and Ethereum that support EURC.
But the euro carry trade remains fragmented. On Aave v3 Ethereum, borrow rates for EURC briefly spiked to nearly 20% around 6:00 a.m. ET Friday before falling below 8% by 11:00 a.m. — a textbook case of what happens when a tightly capped market brushes up against Aave’s interest rate “kink.” Once utilization crosses a certain threshold, even small net borrows can send rates soaring until new supply arrives.
Source: Aavescan.com
In theory, borrowers could arbitrage the spread — borrow where liquidity is cheap (e.g., Base) and lend where it’s scarce (mainnet). But in practice, bridging friction kills the trade. Unlike USDC, EURC lacks a native CCTP-style burn-and-mint bridge, so most flows rely on swap-and-bridge routes or CEX rails.
Portal (Wormhole’s token bridge) has been promoting EURC bridging between chains following its August launch, but even at a modest €10,000 size, transfers from Base to Solana clock in at ~33 bps, and Solana to Ethereum via Portal at ~49 bps. Base to Ethereum EURC bridges can be done for a more modest ~22 bps per via Squid router.
All of these spreads will increase with size, of course, making it difficult to bring rates in line without relying on, for example, Coinbase as an intermediary.
But this can be an advantage for the little guy with capital already in place on these chains. Jupiter’s boost lifts APYs on Solana, but the cost to move funds in and out quickly discourages hedge-fund scale operations. Aave’s mainnet spikes tend to be driven by caps and a small number of large wallets, not durable demand. Risk curator Chaos Labs has twice moved to raise the caps on EURC specifically on Aave’s core instance.
A vault that rotates between chains and strategies can theoretically harvest what individual users can’t.
“The euro is one of the most widely traded currencies in the world,” Benamour said. “With yoEUR, we’re unlocking the best DeFi yield for euro-denominated stablecoins, making it easy for anyone to earn more on their assets.”
As of today yoEUR is principally allocated to Tokemak’s baseEUR vault for which yields are boosted by TOKE token emissions. That would make it appealing to users who don’t want to be bothered with, or gain a tax benefit from avoiding, having to claim rewards. There can also be advantages in terms of risk management, with both concentration risk mitigated and a confidence boost from risk ratings by Exponential.
Euro stablecoins in aggregate now top $540 million in market cap. But until native cross-chain mobility arrives, and money market caps scale up, expect rates to stay weird.
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