Given the possible departure of USDT and other stablecoins from the European Union, there are conflicting ideas about the future of these currencies in the region.
Given the tightening of the regulations that the European Union (EU) will apply to stablecoins or stable currencies starting next June, analysts debate the repercussions that the application of the Regulation for the Cryptoasset Market will have on the ecosystem of the region (Mica).
In this way, some hope that MiCA represents Europe’s exile of the most popular US dollar-pegged stablecoins — such as tether (USDT) and USD Coin (USDC) —. A situation that is anticipated given the announcements made by exchanges such as OKX and Binance, which will stop trading pairs in USDT.
It is also believed that other native currencies, backed by euros, will have more opportunities to capitalize on the EU market. Thus, there are those who think that the emergence of new private initiatives for stable currencies in euros could alter the panorama.
These are two positions in the public spotlight, creating uncertainty about which of the two will prevail.
All this occurs while the time for the first phase of MiCA to come into force is reduced, forcing stablecoin issuers to request authorization from regulators to serve their users throughout the block of 27 countries in the region.
MiCA Expected to Boost Euro Stablecoin Market
There are many who now put their hopes in stablecoins pegged to the euro. Even though they currently have very low use in the eurozone, compared to stablecoins linked to the dollar.
According to statements by Svein Valfells, co-founder and CEO of the euro stablecoin Monerium, the new regulations will boost the launch of stablecoin projects backed by the EU currency.
“Multiple industry observers and analysts, including a recent report from Cumberland, predict an explosion of euro-pegged stablecoins in the coming years,” notes Valfells.
The idea is supported by Jonas Frederiksen, the EU Policy and Government Affairs expert who predicts that European companies will increase the percentage of transactions with stablecoins backed in euros, at the same rate as the circulation of those backed by the dollar is limited.
The growth of stablecoins in euros that was generated in 2023, after the approval of the MiCA Law, is taken as an example. It is noted, in this sense, that although stablecoins linked to the euro have a lower trading volume, compared to those anchored to the dollar, they represent the second largest sector in this market.
Some of the obstacles that prevent them from competing at the same level with their counterparts in dollars are not left aside. Among them is the dominance of the US currency in international trade; and the fact that the infrastructure of the cryptocurrency industry is largely centered in the United States.
Consequently, analysts are convinced that it will be possible to increase the volume of transactions based on stablecoins backed by euros until they replace those based on the dollar.
Difficulties in Matching USDT Trading in Europe
There are analysts who find it difficult for euro stablecoins to replace the trading of currencies such as USDT and fear that their momentum will continue to represent an insignificant fraction of the market.
In any case, the question about what will happen to stable currencies in the eurozone will remain in the air. We still have to wait to evaluate the dynamics that will be put in place in the coming months, once MiCA comes into force in the region.
By Audy Castaneda
