Anchored Euro (AEUR): a new stablecoin pegged to the euro exchange rate
The lion's share of stablecoins issued on the crypto market is pegged to the US dollar and most often backed by it. If you look at the list of CoinMarketCap — it becomes clear that all of the 10 largest by capitalization stablecoins are pegged to the USD. There are not many alternatives for other currencies.
One of them is a new stablecoin Anchored Euro, the rate of which is pegged to the EUR currency.
What is the Anchored Euro?
Anchored Euro (AEUR) is a stablecoin backed by the Euro and pegged to the EUR exchange rate. At the time of writing, the AEUR token exists in only two blockchains, Ethereum (ERC-20) and BNB Smart Chain (BEP-20).
The Euro is the primary payment unit of the European Union and the second-largest reserve currency in the world. Still, contrary to this, few trustworthy stablecoins on the crypto market provide a peg to the EUR. Even though the Anchored Euro has only recently been released, the stablecoin has already become the second most capitalized among EU currency-pegged assets after STATIS EURO (EURS).
The issuer of AEUR is the Swiss company Anchored Coins AG, founded in 2022, which has also issued the ACHF stablecoin, secured and pegged to the Swiss franc exchange rate. Anchored Coins AG's reserves are verified and validated by an independent US-based Assurance LLC.
According to the official website of the issuer Anchored Coins AG, at the time of writing, a total of $66.7 million AEUR tokens have been issued, and the reserves represent 100% of the amount of the created stablecoins. The capitalization of the AEUR stablecoin is about $72 million, according to the CoinMarketCap website.
How does Anchored Euro work?
New AEUR tokens are generated using a collateral mechanism: a user who wants to receive a stablecoin deposit in EUR currency, and the issuer credits his wallet with an equivalent amount of AEUR. To return the currency, it will be necessary to give AEUR to the issuer: the company will "burn" the deposited tokens and return the equivalent amount of EUR to the user's account.
All token issuance, burning, and blocking operations are carried out via a smart contract, which is also controlled centrally by the issuer Anchored Coins AG. The Anchored Euro smart contract includes a mechanism to limit issuance: the issuer simply cannot issue more tokens than the reserve allows.
What is AEUR used for?
Anchored Euro is a typical stablecoin without any unique features and, like all others, is used to fulfill 3 main tasks:
- Asset protection against volatility. The exchange rate is much more stable compared to highly volatile digital assets such as Bitcoin, Ethereum, BNB Coin, and others, so it allows to protect the investor from the risks associated with rapid changes in the exchange rate of cryptocurrencies;
- Fast and cheap cross-border transfers. Traditional bank transfers can be time-consuming, and fees average 3-5% of the transfer amount. Stablecoins like AEUR allow you to transfer large amounts in a short amount of time with commissions as low as a few dollars.
- Opening access to DeFi. Once the currency is exchanged for a stablecoin, users can access all the possibilities of DeFi, from trading on decentralized exchanges to mining liquidity in any protocol.
Risks and drawbacks of Anchored Euro
Immediately after listing on exchanges in December 2023, the AEUR lost its peg to the Euro and rose to $2.8. However, the price stabilized five days later and has only deviated slightly since.
The main risk of using the Anchored Euro is that the stablecoin is new and has not yet passed the time-test. In other words, the asset has not yet demonstrated its resilience during high cryptocurrency volatility caused by significantly active investors and traders.
Given the sad experience with UST, AUSD, and USDN, new stablecoins raise investor concerns, so the central liquidity is distributed between the largest USDT and USDC stablecoins. Even major stablecoins such as TrueUSD (TUSD) and USD Coin (USDC) have sometimes lost their peg to the US dollar.
Another risk, as with USDT, USDC, and PayPal USD, is centralization. The issuing company Anchored Coins AG can block AEUR tokens at specific addresses.
The third disadvantage of Anchored Euro is the limitations associated with the centralization of the stablecoin. For example, according to regulatory rules, AEUR is forbidden to be used by US residents. The issuer is obliged to follow the prescriptions of local regulators, so it can at any time restrict access or even block assets at the request of authorized organizations.
Conclusion
It is still difficult to assess what advantages Anchored Euro has over already existing euro-linked stablecoins such as:
- STATIS EURO (EURS),
- EURC,
- Celo Euro (CEUR).
The emergence of AEUR plays an essential role in the crypto market as liquidity grows along with it, which in turn attracts even more investors and traders.
However, using tokenized currencies carries higher risks, including the possibility of losing parity with the Euro in this case, the chance of asset theft due to hacks of DeFi protocols, and the blocking of funds in the cryptocurrency wallet.
