Event Summary: The Euro Coin (EUROC) by Circle: The First Big Euro Stablecoin?

In this panel about The Euro Coin issued by Circle, the panelists discussed topics such as why stablecoins are a development platform and how they can impact the future of financial services. For those who missed the panel, you can watch the panel on YouTube, listen to the event as a podcast or read through this comprehensive summary of the event.

During this panel, Sarah Palurovic welcomed the following panelists:

Teana Baker-Taylor is the Vice President of Policy & Regulatory Strategy, UK/EU at Circle. A main part of her job is to engage policy makers around the world to help develop practical balanced regulatory frameworks for digital assets. 

Joao Reginatto is the Vice President of Product Management at Circle. He joined Circle seven years ago. During this time, he already led the buildout of the US Dollar Coin (USDC). He is now managing the product management team that is focusing in the stablecoin space including the teams that developed the USDC and Euro Coin (EUROC) as well.

During this panel, the panelist talk about stablecoins in general as a developer platform and about the issued stablecoin by Circle, the EUROC.

At the beginning of this panel, Joao shared a keynote to the audience with the topic “Stablecoins as a Developer Platform for Financial Services”.

His first slide read the phrase the internet needs an uber “money API”. With a reference to this phrase, he explained that humans were the admins of the internet over the last 30 years which spawned stunning innovation on how people can communicate, gain information, and engage with counterparts around the world.

A further innovative outcome of the internet are APIs that are programmable ways of accessing vast amounts of information and communication infrastructure. The fact that most of the financial services are built on top of 20^th century infrastructure turns out to be an obstacle for the next generations of technology as they are not fully digital and are only maintained on weekdays at certain times. A money API would be the answer that is able to run on internet rails for developers and businesses around the world. In essence, a money API is trying to build on top of 21^st century infrastructure to increase the capability and access that other businesses running on internet infrastructures already have. From Joao’s point of view, he believes that stablecoins are the best answer to create a money API that runs on the internet.

“The myth of The Infrastructure Phase” as the second part of his presentation described that when it comes to technology, application development inspires infrastructure that tends to follow in terms of development to enable applications. The vision of developers and businesses is to try to improve a specific process. The development of an application could bring the realization that the infrastructure has real limitations. The team is then focusing on building and growing the infrastructure that not only allows them to build what they want but leads to completely new innovation.

This approach brought some famous innovations for the development of the cryptocurrency environment such as infrastructures of BTC, ETH, Metamask, ERC20, Web3 API and applications like Silk Road, just to name a few examples.

His keynote also elaborated on  Circle’s projects. They developed the application platform for the USDC by building the idea of stablecoin APIs and tools for developers which proved successful The first customers were Dapper Labs, dharma and FTX.

The track record of stability for the USDC is quite promising. Circle holds 1:1 (one-to-one) cash reserve and US treasury bonds for the USDC tokens in circulation. USDC’s market capitalization is around 54 billion USD and is in circulation in various ecosystems, accounting for a 5,000% growth since July 2020. The USDC is already supported to be used for transacting in more than 190 countries. The USDC is the most redeemable stablecoin. Since its inception, 125 billion dollars have been redeemed. The broad ecosystem is currently supported in eight blockchains and it is still growing. When it comes to mainstream financial services, the USDC was adopted early by Stripe, Visa, Mastercard and MoneyGram. The developed infrastructure by Circle is the most automated stablecoin issuance and redemption flow that runs 24 hours a day, 7 days a week all around the world.

The Euro Coin was launched in July 2022 and follows the same principles of the USDC with regards to its infrastructure, trust, goals for transparency reportings and liquidity.

Questions from the audience about Joao’s keynote:

 1)  What are the transparency report plans of the backing structure of EUROC?

 Joao answered that the Euro Coin will follow the same reconciliation and attestation procedures of the USDC. They are currently working towards moving from monthly attestation to daily attestation for the USDC.

2)    What will the backing of the EUROC consist of?

Joao answered that the euro reserves will have a more streamlined backing structure to begin with as the scale of the reserves have not currently reached similar levels of demand as the USDC.  Right now, there are just over five million EUROC in circulating supply. The composition of the USDC reserves is a combination of cash reserves and short-term US treasury bonds. The composition of the Euro Coin reserves are completely cash based as of right now.

Teana added, that one of the significant differentiators for Euro Coin versus other existing euro denominated coins is that the reserves are held in euros. She further explained that any of the potential foreign exchange market slippages that might occur in another euro denominated stablecoins does not exist with the EUROC.

 3)   What are the advantages of using EUROC over USDC and do you see a competition amongst both or are they built for different purposes?

Joao began to answer this question by comparing the infrastructure of USDC with regular fiat dollar infrastructure. There are only certain companies that are allowed to store money in traditional forms, such as banks. As a non-banking company that is building products in that space, they have to have a relationship with a bank and have to write code against banking APIs for example. There is also a new infrastructure needed, as traditional banks are not running 24/7. These circumstances lead to thinking borders agnostic, thus, beyond a particular jurisdiction if you have to transact and send funds across borders as it would be tremendously costly and slow-moving to do so.

To decide between using USDC versus EUROC, it depends on the type of business that needs to be built. All currencies will have their right to exist.

 4)    How will Circle proceed with regulation for the EUROC?

 Teana answered that Circle has a very keen interest in the development of transparent and well-regulated digitals asset markets. The partnership between public and private sectors is critical to develop that technology neutral principle-based regulation. One of the key issues is the lack of harmonization. Europe is setting a harmonized policy and a regulatory standard as a basis for  the future of crypto assets in the third largest economic zone in the world which she considers to be a significant milestone. With the advent and adoption of MiCA in the next two years, an end-to-end holistic regulatory framework for digital assets in Europe will provide regulatory clarity and a clear regulated path for innovators across 27 different member states and passporting rights between those countries.

From Circle’s perspective, they plan to continue to invest and grow their presence in Europe and to help this responsible MiCA-conforming crypto asset economy. Circle also tries to aim to make the EUROC a MiCA-conforming digital currency.

After the Q&A session from the audience, Sarah directed the below-listed questions to the panelists:

 1)    What are the growth projections for the EUROC?

What Joao and his team have learned so far in building EUROC is that the development of a stablecoin creates network effects. As more currencies are integrated into this infrastructure, more use cases are enabled. USDC was launched in a crypto-capital markets context and there has been a lot of demand for alternative dollar stablecoins in 2018. The established partnership with Coinbase was another step in demonstrating that core crypto companies are actively seeking a trusted alternative. From Joao’s perspective, he believes that USDC benefited from that almost immediate product market fit spurring its growth. The demand Circle has seen for the EUROC is already riding a mainstream adoption wave, as large-scales companies, financial institutions and payment processing providers welcome the introduction of the Euro Coin tremendously. 

A study published by Chainalysis in 2021 indicated that Europe was the fastest growing region for the  retail adoption of DeFi. Conclusively,  European customers are interested in experimenting and holding euro-denominated cryptocurrency balances. Before the end of 2022, there will be a broad adoption of Euro Coin within the crypto industry for the main crypto capital markets.

 Teana added to Joao’s perspective, that it would be important to see how and where the retail market is going to develop. The payment network today enables the traditional payment infrastructure and as there are more merchant acquisitions online (e.g., Stripe, Mastercard), Circle is creating a bridge between digital payments and digital Web3 applications to be able to transact with digital money.

 2)  How does EUROC differ from other euro denominated stablecoins? Which benefits does EUROC provide as compared to dollar denominated stablecoins?

Teana elaborates that the EUROC will enable new business models to form and that a regulated approach to a euro denominated stablecoin can, in fact, prevail. The correction period and acknowledgement that stablecoins are in fact not all created equally opens the door for other use cases to expand. A statistic that Teane found interesting and came out of Gartner research between December 2021 and January 2022 was the prediction that by 2024, 20% of all business will use digital currencies for payments. 

She further continued that partnerships such as the one between Moneygram and Stellar foundation is a great example of how “internet-ready” money can be used both within and outside the eurozone.

Joao added that Circle sees two things happen already: The first is about the utilization inside the eurozone. Startups receive  fund money via digital transactions. And startups that have a bias to digital money put their employees’ payroll onto a digital wallet denominated in USDC.

3)    How is the future of EUROC envisioned within and outside the eurozone?

Joao elaborated on the importance of having EUROC as an asset outside of the eurozone. As soon as Circle launched Euro Coin in Turkey, both retail and institutions have inholding euro exposures as the Turkey-German corridor is very relevant for remittances and flows in general. This brings demand from Turkey-based businesses to hold EUROC on behalf of their customers regardless of whether they are retail clients or businesses.

 Question from the audience that were directed to the panelists:

 1) Is there any GDPR problem if Circle would send data under the standard contract clauses to the US?

 Teana answered that the European-based customers go through the same onboarding process that all Circle’s global customers go through. Within the terms and conditions, there are the necessary triggers to be able to share information across borders. From her point of view, there is no major difference between how Euro Coin customers are onboarded versus USDC customers.

 2) Is there some type of handicap when switching between currencies if Circle accepts payment from European commerce and companies regardless of where you are based?

Teana answered that the cross-border challenges at the moment are similar for all digital currencies. At the moment there are foreign exchange market slippages between a euro or sterling and US dollar denominated transaction. Circle currently expands into other digital currencies with assets denominated in even more different currencies. While this does not erase but remove some of the existing frictions that exist between transacting between different currencies.

3)    Is Circle planning on introducing any EUROC yield programs?

Joao answered that Circle has the intention to expand the yield products they already have created for the USDC. That expansion will take some time as there needs to be a demand for Euro Coin borrowing first which is currently hampering  the buildout of a yield generating product.

About the author

Luca Rose joined the DEA as an associate in October 2021. He is curious about the development of cryptocurrencies in general and the adoption in sectors such as finance, industry and logistics.

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This article was prepared by the author. The views expressed in this article are the author’s own and do not necessarily reflect the views of the Digital Euro Association.