The head of Strategy of Unstoppable Finance sees the MiCA bill as a stumbling block. The analyst considers that creating a European stablecoin is urgent to avoid the influence of the United States.
Patrick Hansen, head of strategy of DeFi startup Unstoppable Finance, recently explained why Europe has not yet developed its own stablecoin. It would allow the region to avoid its dependence on the United States in regulatory matters, among other things.
The analyst stated the main reason for not launching a stablecoin regulated by the European Union. The Central Bank of Europe (ECB) set a negative interest rate (-0.5%) for deposits.
Hansen described a hypothetical case in which Europe has developed a stablecoin like USD Coin (USDC) from the company Circle. He called on his Twitter followers to imagine a EURC with a USDC market capitalization of EUR 50 billion. He explained that the issuing firm would have to pay EUR 250 million of interest on the euro reserves due to the regulations in force.
He considers it is hard for a company to build a sustainable and profitable business model if it has to pay those amounts. The regulations contemplated in the Markets in Crypto Assets (MiCA) bill will add to that. That rule proposes a regulatory framework for cryptocurrencies through a licensing regime to issue a stablecoin in the eurozone.
Hansen also argued that some USD-pegged stablecoins are experiencing a massive network effect from their use in various businesses and their corporate adoption. The analyst referred to USDC, USD Tether (USDT) and TerraUSD (UST), the latter of which has the third-highest accumulated value in the market.
The expert concluded that that situation is an often ignored collateral damage to the monetary policy of the ECB on the European crypto space. He added that this would hardly change if stablecoin issuers have to hold 1-1 cash and cash-like assets in reserve and negative interest rates prevail.
Hansen Is Not Alone in That Analysis
In March, Philipp Sandner, head of the Frankfurt School Blockchain Center in Germany, said that Europe lags behind. He considers that the continent lacks a significant number of stablecoins and is making slow progress in its initiative to launch a CBDC.
He added that the ECB might accelerate its development of a digital currency because everyone is pushing it to do it. However, he pointed out that it is a large-scale project that will require a lot of time and work.
In addition, Sandner recalled that regulators had rejected stablecoins after the launch of Libra, the Facebook cryptocurrency. He explained that the economic ministers of Germany, France and other countries were happy because the project had left the continent.
Europe Needs to Create a Stablecoin Urgently
Patrick Hansen has studied the development of European policies for crypto assets and has explained why the continent cannot launch a stablecoin. However, the analyst does believe that they should create a cryptocurrency of that type for three reasons that he set out in November.
First, he said that European Union DeFi users are constantly prone to currency risks.
Second, the stronger USD stablecoins, the greater the political influence of the United States, as they regulate and supervise USDC and USDT, among others. Hansen commented that the EU should not want future stablecoin-based payment systems to become as politicized as current fiat systems.
Finally, Hansen believes that the monetary policy of the ECB could lose its effectiveness. He highlighted that growing financial/economic activity in the EU denominated in USD would undermine the validity of that legal document.
By Alexander Salazar
