New York: Cryptocurrency firm Circle announced on Thursday that it will begin issuing its first euro-denominated cryptocurrency, a stablecoin known as Euro Coin, later this month.
The stablecoin, i.e. it is backed by durable assets, is being launched at a time when the value of cryptocurrencies like bitcoin is dropping drastically, which has led crypto businesses to fail and erase billions of dollars of digital wealth. This has led to calls for government regulation, which the European Union is set to approve.
Circle owns and operates USD Coin, the second most popular stablecoin in the industry, with over $54 billion in the coin. The most popular is Tether, which has a market cap of over $70 billion.
Stablecoins have become an increasingly important part of the cryptocurrency market, acting as a bridge between traditional financial services like banks and those who want to invest or lend in bitcoin or ethereum. They are usually backed by durable assets, such as cash, gold, or safe government bonds, and are usually priced as one coin for one unit of a particular type of currency.
USDC is backed 1-to-1 by cash and short-term Treasury bills. The new euro coin will be fully backed by euros held in euro-denominated bank accounts, Circle said.
The company is launching Euro Coin amid the cryptocurrency turmoil. The third largest stablecoin, Terra, collapsed in May within days. Terra was not backed by hard assets, like Tether or USDC, and instead relied on an algorithm to control its $1 value.
The Celsius company, with more than $10 billion in deposits, effectively went bankrupt this week, and customer deposits have been locked away in the company’s accounts with no timeline indicating when or if customers will get their funds back.
Circle’s USDC has been a popular place for cryptocurrency investors to move their investments during the turmoil. The total number of USDC in circulation rose from $49 billion in early May to over $54 billion this week, according to Coinmarketcap.com. At the same time, Tether’s circulation has grown from $83 billion to around $71.5 billion.
“It’s actually, in some ways, the perfect time to launch products,” Jeremy Allaire, CEO and co-founder of Circle, said in an interview. “The market turmoil has been a really positive catalyst for USDC. This has been the flight to security for crypto.”
Circle’s euro coin will be tradable on some major crypto exchanges, including Binance, starting June 30.
The European Union has been working on regulating cryptocurrencies and other crypto assets like stablecoins.
The bloc’s Financial Services and Stability Commissioner, Mairead McGuinness, said Wednesday that the Terra crash and Circle’s troubles highlighted the need for crypto rules.
They are also needed to help enforce Western sanctions against Russia when cryptocurrencies could be used to evade them, she said.
EU rules “will be the right tool to address concerns about consumer protection, market integrity and financial stability”, she said.
The regulations include measures to combat market manipulation and prevent money laundering, terrorist financing and other criminal activities. They also contain requirements to clearly state the risks and costs to consumers.
EU lawmakers have drafted a bill that requires agreement from the bloc’s parliament and all 27 member countries, which is expected soon.
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Company Behind Popular US-Dollar Stablecoin To Launch Euro Coin
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