The EU is currently ironing out the final wrinkles in MiCA, the regulation of European crypto markets. Crypto advocates are concerned that in it there is little room for dollar stablecoins. They have sounded the alarm.

Crypto lobbyists from Blockchain for Europe and the Digital Euro Association have written a letter to the European Council calling for dollar stablecoins to be allowed in European crypto markets. The wording used by the current version of MiCA needs to be clarified, as it creates uncertainty.

If that clarification does not happen, citizens and crypto companies might be barred from trading USDT, USDC and BUSD, for example, starting in 2024. That is currently the top 3 dollar stablecoins. Therefore, the lobbying organizations state:

“Restricting their use in the Euro area would cause crypto markets here to seize up, with potentially destabilizing effects and a major outflow of crypto activities outside of the EU.”

It would mean that Europe will (continue to) lag behind the rapid innovation in the crypto industry. As a country or federation, 'leader in regulation' is not a title to be proud of: your talent will leave for the US, El Salvador or South Korea.

New euro stablecoin launched

The largest euro stablecoin is Stasis Euro (EURS) with an market cap of 120 million euros. In June of 2022, Circle, the company behind UDSC, launched Euro Coin (EUROC), the euro stablecoin. The number of these in circulation (76 million) is barely more than a tenth of a percent of the number of USDCs floating around (52 billion)!

It shows that there is simply much less demand for euro stablecoins. World trade is largely in dollars and crypto trading is largely in dollar stablecoins.

Crypto regulation the center of debate

Over the past year, there has been a lot of fighting over the upcoming EU regulations surrounding crypto. Initially, it seemed for a while that Bitcoin mining would be banned in Europe. That ended up not happening. The next point of contention was about so-called "unhosted wallets," part of the so-called TFR regulations. This requires crypto exchanges to collect data from the owners of crypto wallets.

The new point of contention is dollar stablecoins. Perhaps the EU fears that it will have less control over the money supply if citizens flee to the (crypto) dollar in droves?