Euro stablecoin market surges under MiCA
French and Irish fintech companies have collaborated to launch a euro-backed stablecoin. The coin will be launched on the Stellar network one month after the MiCA stablecoin legislation was enacted.
The European Union’s Markets in Crypto-Assets Regulation (MiCA) framework is gradually taking effect by its intended implementation timeframe. The initial set of regulations, which went into effect on July 1, focused on stablecoins and their issuers. These explicit standards have cleared the market of competitors unable to meet legal criteria and provided a favorable atmosphere for stablecoins linked to local currency.
MiCA rebirth
Next Generation has significant ties to the well-known fintech player Tempo France. This startup first introduced EURT in 2017 in conjunction with the Stellar Foundation, making it one of the first euro-pegged stablecoins.
However, the absence of a regulatory framework resulted in the project’s suspension. However, under MiCA, stablecoins are designated as electronic money tokens (EMTs), which aligns them with traditional e-money and requires issuers to have an EMI license or be a credit institution.
This legislative clarity has improved the euro-backed stablecoin market, making it more predictable and appealing to investors. At the time of MiCA’s passage, one industry analyst told Cointelegraph that they expected a move towards euro-backed stablecoins as demand increased in European markets.
Are stablecoins on the rise?
The Central Bank of Ireland has already authorized Decta as an EMI, which it will use to obtain a license to issue EURT, assuring full regulatory compliance.
Suren Hayriyan, president of Next Generation, stated that the current demand for euro-backed stablecoins is around $30 billion, while the supply is less than $300 million. The alliance hopes to close this gap, and EURT is expected to grow significantly over time.
At the moment, key players in the euro-backed stablecoin market include Circle’s EURC stablecoin and Tether’s EURT, which Hayriyan refers to as “main competitors.” “However, our robust regulatory compliance and technological infrastructure position us strongly in this evolving market,” the CEO stated. Next Generation and Decta intend to launch EURT by October.
Circle was the first worldwide stablecoin issuer to comply with MiCA, and it chose France as its European headquarters, citing the country’s “forward-looking” approach to digital asset regulation.
The activation of MiCA is expected to significantly boost growth in the euro-backed stablecoin sector. Market forecasts foresee a minimum market capitalisation of 15 euros by 2025, rising to 70 billion euros by 2026 and potentially exceeding 2 trillion euros by 2028.
As of July 31, stablecoin market capitalization was rising, up 2.1% to $164 billion in July. This was the biggest level since April 2022, while stablecoins like USD Coin $1.00 saw their trading volume increase by 48%.