Circle says its euro-backed stablecoin EUROC will adhere to US regulatory standards that apply to leading fintech and payments firms like PayPal and Square. Launched on June 30, EUROC is Circle’s second stablecoin. It falls more in line with the regulatory and security standards of the company’s dollar-backed USD Coin. Circle’s other products are related to DeFi.
Silvergate Bank, which is headquartered in the US, will be the initial custodian of the stablecoin. It will not be available to non-US customers until relevant licenses are obtained. A spokesperson for Circle said they will not directly solicit customers outside of the US until the token obtains relevant licenses in those jurisdictions.
Jonas Gross, head of digital assets and currencies at Etonec, said negative interest rates in Europe had been a significant reason why so few stablecoins are pegged to the euro. He pointed out that fiat-backed euro stablecoins used the funds collected from users to invest in government bonds. Interest rates for both variants have been negative for a long time. As such, it was unprofitable to issue a fiat-backed euro stablecoin. Now as interest rates increase, the business model behind stablecoins looks promising.
Maximilian Forster, co-founder and chief business officer at CashOnLedger, said that because of the regulatory uncertainty and the publication of MiCA in the EU, multiple companies and startups in Europe are hesitant to develop a stablecoin or euro-pegged stablecoin. EU regulators recently reached an agreement that stablecoins will be subject to operational and prudential rules.