Last week, Finnish company Membrane Finance launched the first and only stablecoin, which is fully regulated by the EU. The stablecoin utilizes the Ethereum blockchain.
The stablecoin is called EUROe, and the price of one EUROe is supposed to correspond 1:1 to the price of a real euro.
We had the pleasure to interview Juha Viitala, CEO of Membrane Finance, for the article. Viitala shared his insights and opinions about EUROe and the future of the stablecoin market.
So how does EUROe differ from other similar stablecoin projects? EUROe has received an Electronic Money Institution license from the Financial Supervisory Authority (FIN-FSA), which ensures its competitiveness in the crypto market ahead of the upcoming European MiCA legislation, which is the strictest regulatory framework for digital assets ever released.
Europe’s first fully regulated stablecoin
EUROe is an Electronic Money Institution (EMI) regulated by the Financial Supervisory Authority.
“EUROe is the first and only stablecoin that has official approval from the EU’s highest state supervisory body.”
– Juha Viitala, CEO of Membrane Finance.
Electronic Money Institution is a legal entity that is licensed to issue electronic money.
Only the competent supervisory authority of a certain country can grant permission for such activity, and in the case of EUROe, this supervisory authority is the Finnish Financial Supervisory Authority.
All EUROe funds are always kept in regulated European banks.
Where did the project start?
The idea of a euro-based stablecoin started about two years ago when Juha Viitala and his team noticed that there were no euro-based stablecoins on the market.
Instead, there were plenty of dollar-based stablecoin options, and many European crypto companies kept part of their cash in them.
“We thought that it would be ideal to gain competitiveness by creating a regulated, safe and reliable euro-based system operating in the EU region.”
A euro-based stablecoin would make it easier to pay the bills of companies operating in Europe and reduce exchange rate risk compared to a dollar-based stablecoin.
Why is there a demand for a regulated Euro-stablecoin?
Recently, more and more large asset management companies have announced their intention to issue tokenized securities and investment instruments. Tokenized money is a good pair for them.
For example, Paxos Trust Company, a New York-based financial institution, tokenized its offering of US government bonds in September 2020.
Tokenization is a method based on blockchain technology that connects the right for assets to the blockchain so that its ownership can be distributed to several parties with the help of so-called tokens.
With the help of tokenization, the liquidity of an asset can be improved, which makes it possible for a wider group to invest in it.
For example, an art object with financial value can be tokenized and thus made more accessible to investors.
This token then acts as proof of ownership, and it can be traded or transferred more efficiently than traditional assets thanks to the blockchain
“In order to make native transactions with tokenized investment instruments, you need Internet-native money with them. This can open up a big market for the tokenized euro.”
A euro-based stablecoin will hopefully bring more leverage and utility to institutional investors operating in Europe, whose previous stablecoin options have been only dollar-based.
The biggest problem with dollar-based stablecoins for many companies operating in Europe has been that when the company converts its funds to dollar-based stablecoins, the company’s fiat currency is transferred to the United States.
When part of a European company’s assets are tied to another country’s currency or are physically located on a completely different continent, it causes various problems, such as:
- Differences in legislation: European and American legislation differ and can cause problems in the management and use of the company’s funds.
- Taxation: The United States and Europe have different tax laws, which can cause problems regarding the taxation of company assets.
- Currency risks: Risks related to currency exchange always exist, and managing them can be challenging and time-consuming for the company.
- Politics and Economics: Political changes or changes in the US economy can affect the value and management of a company’s assets.
“EUROe enables a euro-based on-ramp to the crypto world, allowing institutions to keep their reserves in Europe.”
Future plans for EUROe
In the future, Membrane Finance, which developed EUROe, will focus on ensuring that stablecoin giants operating from the United States, such as Tether or Circle, will not completely take over the European stablecoin market.
Dollar-based stablecoins alone currently hold $100 billion worth of fiat currency. Still, the stablecoin market is expected to grow as more and more investors, and companies begin to utilize them.
Membrane Finance believes that the euro-based stablecoin market will rise to the value of 50-100 billion dollars in the next market cycle.
Membrane Finance hopes that the euro-based stablecoin market would be run from Europe in the future and not from the United States.
How can you acquire EUROe?
EUROe is currently cooperating with crypto exchanges and OTC markets. In practice, this means that Membrane Finance mints EUROe tokens for exchanges and other crypto platforms, through which they then become available to investors.
In the future, it will be possible to buy EUROe from centralized and decentralized crypto exchanges. During the beginning of the year, EUROe should already be widely available – possibly also in Finland.
“We are in discussions with several operators. We believe that EuroE will be very accessible already at the beginning of the year. We don’t want to get ahead of things yet, but hopefully here in Finland as well.”
The future of the stablecoin market
It is difficult to predict exactly what the future will bring when it comes to the stablecoin market, but there is a high probability that stablecoins will continue to gain popularity and their usage rate will increase over the coming years.
Stablecoins are an essential part of the move towards a blockchain-based monetary infrastructure and are expected to bring more ordinary people into cryptocurrencies who have previously been unable or unwilling to delve into them due to their wild volatility.
Although stablecoins offer investors many interesting opportunities already, it is believed that the number of their use cases will continue to grow in the future.
Growth is expected, especially from the financial sector, for which stablecoins offer many opportunities:
- Better liquidity: Stablecoins offer stable value and enable easy and fast money transfers regardless of the currency or the geographic location.
- Lower costs: With the help of stablecoins, the costs of the services of banks and other financial institutions can be reduced because their management and transfer are more efficient and cheaper than fiat currency.
- Better risk management: Compared to other cryptocurrencies, stablecoins offer better risk management due to their stable value, making them a more attractive investment option for the financial sector.
- Transaction throughput: Stablecoins bring more speed and efficiency to transaction throughput compared to fiat currencies.
When talking about euro-based stablecoins only, Juha Viitala believes that Euro could take about 20% share of the stablecoin market in 4-5 years.
“This is based on estimates, but if the entire crypto market rises to the size range of $5-10 trillion, that means a $50-100 billion market for Euro stablecoins.”
A euro-based stablecoin also brings benefits to ordinary investors: When part of the crypto portfolio is pegged to the euro, it reduces currency risks and balances the difference between the euro and the dollar.
In addition, the diversification between different currencies enables the value of the entire portfolio not to be attached to the economy and politics of the United States.
“I personally would like to keep part of my crypto portfolio in euros.”
EUROe in summary
Last week, the Finnish company Membrane Finance launched the EUROe stablecoin. The EUROe is based on the Ethereum blockchain, which turns the fiat euro into a 1:1 pegged digital currency that can be transferred via the Ethereum blockchain.
Membrane Finance also plans to expand EUROe’s support to more blockchains, such as Solana, Polygon, and Arbitrum One blockchain.
For every EUROe issued, there is at least one fiat euro in a European financial institution or bank that is separate from Membrane Finance. This ensures that the company’s own funds are not mixed with EUROe’s funds.
The publication of EUROe plays a great importance to the European crypto community and to the crypto market, as EUROe is the first and currently the only stablecoin fully regulated by the EU. In addition, it is among the few stablecoins that have been able to take into account the effects of the upcoming MiCA regulatory framework
Currently, the stablecoin market is dominated by dollar-based stablecoins, but the use of euro-based stablecoins is expected to increase during the coming market cycle.
Especially for companies operating in Europe, a euro-based stablecoin will bring significantly more benefits than dollar-based stablecoins.
EUROe is currently minting its token for crypto exchanges and OTC market makers, but it should be well available on decentralized and centralized crypto exchanges during the beginning of the year.
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