Does the world need Euro Coin? There are already stablecoins pegged to the Euro in the market. The difference here, however, is Circle. As the issuer of the well-regarded USDC, they have the reputation, the know-how, and the clientele to make this happen. Even with all of those advantages, it’s the market that will decide if the world needs Euro Coin.
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On the project’s page, they describe it as, “Euro Coin (EUROC) is issued by Circle under the same full-reserve model as USD Coin (USDC), a trusted dollar digital currency with more than $54 billion in circulation.” At first, Euro Coin will exist on the Ethereum blockchain, it’ll be a traditional ERC-20 already compatible with everything out there.
1/ CIRCLE LAUNCHES EURO COIN: Today, we announced our 2nd major fiat-backed stablecoin, Euro Coin, which went live on Ethereum mainnet, and will be available to mint and redeem on June 30th.
— Jeremy Allaire (@jerallaire) June 16, 2022
The Euro Coin will be “100% backed by euros held in euro-denominated banking accounts so that it’s always redeemable 1:1 for euros”. The difference with regular euros is that EUROC will be “available 24/7 and moves at internet speed”. The new stablecoin debuts on June 30th. “Businesses can mint Euro Coin straight from the source by depositing euros into their Circle Account using Silvergate’s Euro SEN network.”
What’s Euro Coin ’s Main Use?
In a recent tweet, Circle CEO Jeremy Allaire summarized the product’s value proposition. “Like USDC, Euro Coin is being issued under a regulated framework for money transmission, under the same statutes that regulate USDC, with full-reserves in Euro, with the same security, liquidity and transparency that the market has come to expect from Circle”. Does it solve a problem, though? Two words: foreign exchange.
4/ Euro Coin expands opportunities for payments, on-chain FX, trade finance, commerce and broader digital asset markets use-cases. The launch is symbolic of a shift in crypto markets towards greater and greater utility value from blockchain infrastructure.
— Jeremy Allaire (@jerallaire) June 16, 2022
Back to the project’s page, Circle promises “multi-currency digital banking and near-instant foreign exchange, where daily volume in traditional markets can top $6.6 trillion globally.” As we read a while ago in the Bitcoinist Book Club, “The Bitcoin Standard” explains how that huge market emerges just to solve “the age-old problem of lack of coincidence of wants.” As explained by Saifedean Ammous, the process goes like this:
“The seller does not want the currency held by the buyer, and so the buyer must purchase another currency first, and incur conversion costs. As advances in transportation and telecommunications continue to increase global economic integration, the cost of these inefficiencies just keeps getting bigger. The market for foreign exchange, at $5 trillion of daily volume, exists purely as a result of this inefficiency of the absence of a single global homogeneous international currency.”
As Circle’s numbers show, since the book’s publication the foreign exchange market kept growing. And since we’re far from living in a bitcoin standard, with a “single global homogeneous international currency,” the foreign exchange will keep growing. And that’s where Euro Coin comes in.
ETH price chart for 06/16/2022 on Kraken | Source: ETH/USD on TradingView.com
The New Stablecoin’s Characteristics
- Where will the money that backs the operation be? “Circle will hold euros in euro-denominated banking accounts at leading financial institutions, beginning with Silvergate Bank in the U.S.”
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- “Businesses can use a free Circle Account to mint and redeem Euro Coin at no additional cost”. Circle can afford to treat businesses like that because they’re that big and established.
- Circle will audit the Euro Coin. “Grant Thornton LLP will be issuing monthly attestations of Euro Coin reserves, starting with an attestation for the month of July 2022. Circle will publish the attestation reports on this webpage, with July’s report being available to view online by the end of August 2022.”
It’s also worth noting that the main criticism the project received was because they choose Ethereum to start with. However, Circle promises the Euro Coin in other blockchains soon. And considering that USDC exists in every smart contract-enabled blockchain under the sun, there’s no reason not to believe them.
Featured Image: Screenshot from Circle's website | Charts by TradingView