Euro zone finance ministers are set to discuss strategies to support the development of euro-denominated stablecoins. The goal is to ensure Europe doesn’t cede the burgeoning stablecoin market entirely to the United States. Stablecoins are digital tokens designed to maintain a stable value relative to a traditional currency, backed by reserves such as the currency itself or other assets. The stablecoin market is currently valued at approximately $300 billion and is projected to expand tenfold within the next decade, according to a senior euro zone official.
Currently, the vast majority of stablecoins are denominated in U.S. dollars. Recent U.S. legislation, known as the Genius Act from July, aims to solidify this dominance by mandating that stablecoin issuers base their tokens on U.S. dollars or U.S. Treasuries. A consortium of nine European banks, including ING and UniCredit, launched a euro-denominated stablecoin last month to challenge U.S. dominance in the digital market. However, euro stablecoins only account for about $620 million of the total $300 billion market.
Europe has its own regulatory framework for stablecoins, called the Markets in Crypto-Assets Regulation (MiCA). Ministers will discuss whether modifications to MiCA are necessary to encourage the creation of euro-denominated stablecoins. The discussions will revolve around striking the right balance between mitigating risks and fostering financial innovation. They will also consider whether regulatory adjustments are needed to better support the development of high-quality European stablecoins, and how this aligns with the digital euro.
According to the official, this is an initial engagement aimed at bringing the issue to the attention of finance ministers and gathering their initial reactions. The ministers will explore if greater support is required, identify any regulatory obstacles that need resolution, and assess the connection to the digital euro project. The next steps will be determined based on these preliminary discussions.
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