Americans just created the crypto euro…
But now, this crypto-euro is controlled by an American group. “Centralized stablecoins are regulated by the institutions of the country in which they are located. In Circle’s case, that’s the United States. If tomorrow a US regulator tells Circle ‘Block this list of crypto addresses belonging to Europeans,’ they can.”warns Claire Balva.
Crypto exchanges (Coinhouse, Binance, Coinbase) can already freeze the accounts of some users, as well as banks. In March, Coinbase also blocked 25,000 accounts from Russia. But in this new world, cryptocurrencies themselves can censor their users if run by companies. Circle also confirms on its website that it can do so: “Circle and the Center Consortium block addresses only when we are legally required to do so. This includes legal requirements, as well as compliance with US and international sanctions.”
The beginnings of European stablecoins
If dependence on foreign-managed cryptocurrency is questionable, European stablecoins exist, but are still in their infancy, for two reasons:
Developing a large stable cryptocurrency is very expensive. “When you have to find 50 billion, it’s easier in the United States, and besides, the big stablecoins mostly create exchange platforms that are not very present and not very powerful in Europe,” explains the expert from KPMG. Among these giants that have created their own crypto-dollars, there is Coinbase, partly on the origin of USDC, or Binance and its BUSD. A French start-up has already tried, in 2021, to create a euro stable coin: Lugh. Although supported by Casino, its EURL is currently only listed on 4 trading platforms and has only 10 million euros of capitalization, due to lack of funds.
- Regulator caution
According to Claire Balva, “central banks are not at all keen on the idea of private actors managing currencies”. The collapse of Blockchain Terra and its stablecoin UST (Luna), which saw many depositors lose their money last May, particularly vindicated French and European authorities in their desire to control this digital asset. The collapse of this “satblecoin” cryptocurrency in a few days at the beginning of May would lead to the destruction of 50 billion dollars.
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This caution influenced European entrepreneurs. “It is difficult to start creating stable money because we are afraid of getting a big slap from the French regulators [Autorité des marchés financiers (AMF), Autorité de contrôle prudentiel et de résolution (ACPR)]. It’s also a bit cultural. EIn Europe, we wait to see what the regulator will ask, in the United States they work and then comply“, believes Owen Simonin, founder of Just Mining, a cryptocurrency investment company. An unpleasant situation for European start-ups that should be clarified by the future European regulation of the Market of Crypto Assets (MiCA), on which a provisional agreement has just been concluded, found, this Thursday, June 30.
Future MiCA regulation
This European initiative plans to regulate web 3 (internet using cryptocurrencies and NFTs, certificates of ownership in the blockchain), and in particular the use of stable coins. This regulation wants to oblige the companies that manage them to have a reserve guaranteeing 100% of their assets: therefore a good point for Euro Coin. The Council of the European Union also states in a press release that “all stablecoins will be supervised by the European Banking Authority (EBA), and the issuer’s presence in the EU is a prerequisite for any issuance.” Circle will therefore need to get approval from the EU to offer its assets on the old continent, just like Binance did a few months ago.
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This decision would move away from a scenario of dependence on the United States; but it still raises the question of its impact on European entrepreneurs according to Pierre Person, a former deputy for Paris who worked on the topic: “MiCA will only prevent small European players from developing by having a strong control over them, which will favor the big players who are not in Europe”. A point of view not shared by the economist and director of the Rousseau Institute Nicolas Dufrêne who on the contrary believes that “the fact of opening the way to really solid stablecoins will offer a good example by performing reliable players”, while curbing the expansion of large unregulated stablecoins.
This new regulation may allow the approval and development of European stablecoins, such as Lugh’s EURL (a French cryptocurrency created from a collaboration between Casino, Société Générale and several other companies). a reliable stablecoin that has a good reputation with ACPR, so we took the time to offer a crypto-euro 100% guaranteed by funds in Société Générale and audited by Deloitte every month”, welcomes Alban Vendeuvre, its founder. Hour of glory for our crypto start It remains to be seen what the final text of MiCA, which still needs to be approved by the member states and the European Parliament, will contain in detail for these European projects.
How to use stablecoins
Stablecoins are the pillars of web 3. A stablecoin is a digital currency, backed by a “stable” value, a haven, such as the dollar or the euro. Therefore, stablecoins are considered to be less volatile than other cryptocurrencies. “For many Europeans, it is more interesting to have the value of the euro, it tells us more, and then it allows investors not to suffer from the exchange rate of the euro and the dollar,” assures Owen Simonin, the founder the cryptocurrency investment company Just Mining. The euro has indeed lost 14.7% against the dollar since June 1, 2021, and the reverse is possible.
It is already possible to invest in real estate, video games or works of art, thanks to the blockchain, using these stable assets (stablecoins). But while stablecoins mimic the prices of physical currencies, they are not as secure as euros and dollars because they are based on companies or technologies that may fail, like UST of Terra, in early May 2022.