BRUSSELS :Euro zone finance ministers will discuss on Thursday how they can support the development of euro-denominated stablecoins so as not to leave the rapidly growing market only to the United States, a senior euro zone official said.
Stablecoins are digital tokens that have stable value against a regular currency and are backed by reserves like the currency itself or other assets. The stablecoin market is now around $300 billion, but is forecast to grow tenfold over the next decade, the official said.
Almost all stablecoins now are denominated in U.S. dollars and U.S. legislation called the Genius Act from July aims to keep that dominance by requiring stablecoin issuers to base them on U.S. dollars or U.S. treasuries.
“So the discussion is basically how should we position ourselves towards all this,” said the official, who has taken part in the preparations for the ministerial meeting.
Last month, a consortium of nine European banks, including heavyweights ING and UniCredit launched a euro-denominated stablecoin to counter U.S. digital market dominance. But euro stablecoins still account only for around $620 million out of the $300 billion total issuance.
Europe has its own legislation on stablecoins, called Markets in Crypto-Assets Regulation (MiCA), and the ministers will discuss if it needs to be changed to help create euro-denominated stablecoins.
“(The ministers will discuss) whether we have got the right balance between risk mitigation and promoting financial innovations, whether we should be more supportive, if there are some regulatory issues that we need to fix to better nurture the development of high quality European stable points and also discuss how all this links together with the digital euro,” the official said.
“This is very much an early engagement. It is mainly about putting this issue in the hands of finance ministers, getting their attention, first reactions, and we will then see where it takes us later,” the official said.
