VNX Euro (VEUR) - the first licensed stablecoin pegged to the euro

Before the advent of stablecoins, investors had to withdraw assets into fiat currencies, which was expensive due to the high fees set by banks and exchanges.

In 2024, there will be enough stablecoins pegged to the exchange rate of certain currencies, such as the US dollar or the euro. However, stablecoins pegged to the Euro exchange rate are not yet as widespread as those pegged to the value of the US dollar.

What is VNX Euro?

VNX Euro or VEUR is a Euro exchange rate-linked stablecoin released in April 2023, first on the Ethereum blockchain and after a time on Polygon, Avalanche, Solana, Tezos, and Stellar. The VEUR stablecoin was created by VNX Commodities AG, a Liechtenstein-based company specializing in launching real-world tokenized assets (RWAs).

One of the main features of VNX Euro is that the asset was the first stablecoin in Europe to be licensed by the Liechtenstein Financial Market Authority (FMA).

In addition to VNX Euro, VNX Commodities AG has also issued other stablecoins that track the price of various assets:

• VNX Gold (VNXAU) — pegged to the gold exchange rate;
• VNX Swiss Franc (VCHF) is linked to the value of the Swiss franc.

Unlike USDT, USDC, and other stablecoins, which are backed by fiat currency, cash equivalents, and treasury bonds, VNX Euro reserves consist of physical gold reserves. Moreover, all of the VNX Commodities AG-issued stablecoins are backed by gold: VEUR, VCHF, and VNXAU.

This strongly distinguishes VNX Euro from other centralized stablecoins, which the issuer fully controls. Gold is a reasonably stable asset whose rate does not change so rapidly compared to, for example, stocks or cryptocurrencies. However, VNX Commodities AG plans to use other assets to back its stablecoins in the future.

How does the issuance of VNX Euro take place?

Registered customers of VNX Commodities AG can obtain VEUR tokens by depositing an equivalent amount of gold. Customers can then redeem the VEUR and receive gold in return, and the tokens will be burned.

Uses of VNX Euro

In general, VEUR is not much different from most other stablecoins in terms of its uses, and it performs typical tasks for this kind of digital assets:

1. Risk hedging: protection against the volatility of many cryptocurrencies, the price of which can change significantly in a short period;
2. Trading: using stablecoin instead of fiat currencies on the decentralized finance(DeFi) market to buy and sell various digital assets;
3. Income generation: VEUR token holders can make deposits, make loans, participate in liquidity mining, and use other DeFi tools to generate income;
4. Funds transfer: stablecoins are a better alternative to fiat currencies, allowing users to send cryptocurrency anywhere without the restrictions and high costs associated with interbank and international transfers.

Pros and cons of VNX Euro

One of the main pros of the VEUR stablecoin is the presence of a genuine license, which provides legal protection for investors. In other words, the issuing company of VNX Euro will be obliged to compensate any losses at the expense of its reserves in case the token loses parity against the euro.

However, the VEUR stablecoin also has disadvantages:

1. Low liquidity: the daily trading volume of VNX Euro is just over just over $36,000;
2. Small capitalization: as of July 2024, VEUR has only ~$2.6 million;
3. There are a small number of liquidity pools and decentralized platforms supporting the VNX Euro. VEUR stablecoin is traded only on DEX exchanges Orca and Raydium, and there is almost no liquidity there.

Of all the disadvantages mentioned above, there is a significant risk of decoupling the VNX Euro rate from the euro. Due to low liquidity and small trading volume, it is enough to sell only a few tens of thousands of dollars to significantly affect the stablecoin rate.

It is worth noting that the VEUR stablecoin rate is quite volatile and has often deviated from the euro price. For example, in July 2023, the value of VNX Euro fell to ˆ0.95; in October of the same year, it rose to ˆ1.03. Nevertheless, the price continues to be held with little volatility and, over the past six months, has not deviated by more than 2%, which is within the normal range (even large-capitalization stablecoins such as USDT and TUSD over the same period deviated more strongly).

Despite VNX Euro's small capitalization, this index has shown steady growth, although not particularly rapid. Stablecoins linked to the Euro exchange rate are still in low demand, but they are gradually growing, as indicated by market data.