NEW YORK — Cryptocurrency firm Circle said on Thursday it will launch its first euro-denominated cryptocurrency, a stablecoin known as Euro Coin, later this month.
It would be the first stablecoin in euros – the world’s second most important reserve currency after the US dollar – backed by a major player in the industry and could potentially become a major channel for moving cryptocurrencies across Europe.
The stablecoin, which means it is backed by hard assets, is being launched at a time of major declines in the value of cryptocurrencies such as bitcoin, which have caused crypto companies to go bankrupt and wipe out billions of dollars of digital wealth. This has led to calls for government regulation, which the European Union is about to approve.
Circle owns and operates USD Coin, the second most popular stablecoin in the industry, with over $54 billion in that coin. The most popular is Tether, which has a market cap of over $70 billion.
Stablecoins have become an increasingly important part of the cryptocurrency market, acting as a bridge between traditional financial services such as banks and those looking to invest or borrow in bitcoin or ethereum. They are typically backed by hard assets, such as cash, gold, or safe government bonds, and are usually priced as one coin for one unit of a particular type of currency.
USDC is backed 1-to-1 by cash and short-term treasuries. The new Euro coin will be fully supported by euros held in euro-denominated bank accounts, Circle said.
The company is launching Euro Coin amid turmoil for cryptocurrencies. The third largest stablecoin, Terra, collapsed within days in May. Terra was not backed by hard assets, such as Tether or USDC, and instead relied on an algorithm to keep the $1 value in check.
The Celsius firm, with more than $10 billion in deposits, effectively filed for bankruptcy this week. Customer deposits have been locked in the company’s accounts with no timetable for when and if customers will get their money back.
Circle’s USDC has been a popular place for cryptocurrency investors to move their investments during the turmoil. The total number of USDC in circulation has risen from $49 billion in early May to more than $54 billion as of this week, according to Coinmarketcap.com. At the same time, Tether’s circulation has fallen from $83 billion to about $71.5 billion.
““This is actually a good time to launch products in some ways,” Jeremy Allaire, Circle’s CEO, and co-founder, said in an interview. “The market turmoil has been a really positive catalyst for USDC. Has been the flight to safety for crypto.”
Circle’s Euro Coin will be tradable from June 30 on some major crypto exchanges, including Binance.
The European Union has been working on regulations for cryptocurrencies and other crypto assets such as stablecoins.
The bloc’s financial services and stability commissioner Mairead McGuinness said on Wednesday that the Terra crash and Celsius’s problems emphasized the need for crypto regulations.
She said they also need to enforce Western sanctions against Russia for fear that cryptocurrencies could be used to evade them.
The EU rules “will be the right tool to address concerns about consumer protection, market integrity, and financial stability,” she said.
The regulations include measures to tackle market manipulation and prevent money laundering, terrorist financing, and other criminal activities. They also contain requirements to clearly define the risks and costs for the consumer.
EU lawmakers have drafted legislative proposals requiring approval from the bloc’s parliament and 27 member states, which is expected soon.
AP Business Writer Kelvin Chan in London contributed to this report.