Euro Coin (EURC) stablecoin

However, issuers later started issuing Euro (EUR) pegged stablecoins as the demand for such assets increased at a certain point. One such asset is the Euro Coin (EURC), which will be discussed in this article.

What is the Euro Coin?

Circle, the issuer of USD Coin (USDC), issues the Euro Coin or EURC stablecoin. Circle was founded in 2013; two years later, the New York Department of Financial Services issued the company its first BitLicense license, aimed at developing services that use digital assets.

The EURC stablecoin was initially issued on the Ethereum blockchain as an ERC-20 token. However, it later became available on other blockchains as well:

Euro Coin, like USDC, is a centralized stablecoin, the issue and circulation of which is fully controlled by the issuing company. EURC is issued by replenishing reserves with euro currency — this process is called "minting." However, this service can be used only by legal entities. To issue a Euro Coin, a company needs to deposit a certain amount of euro currency into special Circle accounts, after which it will receive an equivalent number of EURC tokens.

Strengths and weaknesses of Euro Coin

One of the EURC stablecoin's main strengths is its ability to be used in EU countries. The Markets in Crypto-Assets (MiCA) bill, adopted by the European Parliament in April of the previous year, has been in force in the EU since June 30, 2024. The MiCA bill restricts US dollar-linked stablecoins like Tether (USDT). Some major crypto exchanges, such as OKX, have even restricted USDT trading to EU residents.

Another strong point of the Euro Coin for investors is the opportunity to save their capital from the intense volatility of cryptocurrencies such as Bitcoin, Ethereum, and others. EURC Stablecoin is an alternative to the euro, allowing its holders to transfer funds without intermediaries, usually banks, and thus save on transaction fees. For example, when transferring euro currency between banks, the commission can range from 3 to 5% of the transfer amount. If you send ˆ10,000, the user will pay from ˆ300 to ˆ500 for the transfer alone. However, if you send the same amount in stablecoin, even the most expensive commission on the Ethereum network will be only a few euros equivalent.

It can be assumed that stablecoins linked to the euro currency will become one of the main alternatives for users living in the European Union and wishing to gain access to trading on exchange platforms. While the use of the EURC stablecoin for trading is not restricted in most countries, market data on trading volumes and capitalization shows that as of July 2024, there is still little demand for such assets.

According to CoinMarketCap, EURC's capitalization is only about $37.9 million, which is even less than that of the failed TerraUSD or UST (now TerraClassicUSD or USTC), which has almost three times as much capitalization. Moreover, Euro Coin ranks only 4th among the stablecoins pegged to the euro exchange rate after:

Since 2022, when Euro Coin's capitalization reached $76.9 million, this figure has fallen by about two times, indicating a rather weak demand for such assets. The capitalization of another stablecoin (USDC) issued by the same Circle issuer has also dropped significantly as investors have been accumulating large cryptocurrencies such as Bitcoin, Ethereum, Solana, and other altcoins over this period.

The low capitalization and resulting low liquidity are some of the main disadvantages of the EURC stablecoin, as it leads to a significant risk of Euro Coin decoupling from the Euro exchange rate. However, in case of loss of parity to the euro, the issuer can compensate losses at the expense of reserves. According to the official Circle website, EURC is 100% backed by the euro and assets denominated in it, confirmed by monthly reports of the auditing firm Deloitte and audits of the leading accounting firm Grant Thornton LLP.

As for the prospects of the Euro Coin, the capitalization chart shows that since October 2023, the capitalization of this stablecoin has been continuously growing. Together with this, the liquidity and trading volumes of EURC are increasing. However, according to all the previously mentioned indicators, Euro Coin is still significantly inferior to even the largest USD-linked stablecoins, which are still the most sought-after in the cryptocurrency market.