The Euro Stablecoin Market is 53x More Competitive Than USD Stablecoins

Despite 7.8% of stablecoins being euro-pegged, they only account for 0.19% of the total supply. This leaves an astonishing number of issuers fighting over a minuscule pie. Birdeye

Why are so many issuers fighting over the minuscule pie? What are the competitive advantages of each of the issuers? Is the potential market sufficiently served?

The Size of the Euro Pie

Today, the issuance of euro stablecoins stands at around €400m. The revenue opportunity, assuming 30% of assets under custody (AUC) parked in commercial banks at 0% and the rest yielding the 2% ECB deposit facility rate in various euro bonds, we are looking at a total interest income of €5.6 per annum. This paltry €5.6 million is the total potential interest income for all euro stablecoin issuers today. That’s a tiny pie!

But not so fast.

Euro stablecoin issuers are banking, of course, on the growth of this pie. So why should it grow and how quickly?

The macro-tailwinds are numerous; clear regulatory landscape for euro EMTs under MiCA, a 10%+ decline in the USD/EUR rate from the beginning of the year highlighting the stability role of local currency to European DeFi users, the uncertainties regarding USD stablecoins in the EU, and ECB-level fears of the EU’s financial sovereignty.

Leveraging these tailwinds, here are a few AUC levers issuers could be targeting for the euro stablecoin sector:

Table 1: Euro stablecoin AUC drivers & potential adoption timelines.

Notes: * estimate from ECB (slide 8); ** assuming 15% of funds in DeFi are from the Euro area and 40% of DeFi TVL is stablecoins; *** rough estimate using publicised payments volume data and assuming velocity of money of 6.0; **** assuming velocity of money of 1.0, see Chart 1; ***** Data from ECB.

From Table 1 it is obvious that the market is lukewarmly lucrative if a single issuer would be able to capture the euro funds parked at CEX/CASPs. Assuming a conservative 90% NIM revenue share (rev share), the issuer would be netting ~€9m p.a. The next step would be DeFi. Today, DeFi protocol teams are more acutely aware of the NIM share deals, and even fully capturing the DeFi market hardly moves the needle; to only approx. €20m p.a. for a single issuer.

Starting a new euro stablecoin issuer based on the state of the current crypto & DeFi markets alone does not make much sense if you are looking for venture style returns – and a new euro stable needs a lot, and I mean a lot, of money to succeed. Liquidity is king and liquidity isn’t cheap.

However, the arithmetic starts to shift as we move to use cases that are mostly outside of the “crypto-native” categories. As Table 1 reveals, the total opportunity, driven by non-crypto adoption like ERP software integration, is potentially €5 billion in gross annual revenue for the entire sector. This single use case justifies the current level of competition. This €5b gross revenue, with likely much lower NIM rev shares than with crypto-native uses, is already extremely meaningful – even if it had to be split between 20 stablecoin issuers (up to €250m p.a. per issuer!). Even more importantly, the secondary market liquidity requirements, vis-a-vis capturing CEX/DeFi share, are much lower. Therefore, the capital cost of going after non-crypto-native markets is smaller – but the technical hurdles are higher as you need to have deep integrations (in this case) with the ERP provider and all related systems.

Someone will go after non-crypto-native markets. It is inevitable and will happen. The ERP row alone justifies the existence of the current euro stablecoin market. But we aren’t seeing much evidence, aside from Circle, that work is being done here.

Other growth drivers from international payments, remittances, savings, tokenised equities trading, and more will drive supply even further. While quantifying the impact of each is hard, we can somewhat safely assume (based on M2 money supply) that the market today is capped at a maximum issuer gross revenue of around €220b.

So is anyone going after the larger opportunities, in practice, today? The short answer is yes; Circle has been trialling EURC and USDC on SAP since 2023. SG-FORGE has also dabbled with bringing various traditional financial instruments to public blockchains in its history. But nothing much has happened in terms of real use – at least yet.

Differentiation Within the Euro Stablecoin Market

The potential is massive, but who is positioned to capture it? Currently, the market is primarily focused on the easy, crypto-native money. By examining the five largest issuers, we can see where their current competitive edge lies – and why most are ill-equipped for the mainstream adoption detailed in Table 1.

Focusing on the five largest issuers* – Circle, SG-FORGE, Monerium, Angle, and StablR – let’s quickly summarise what their competitive advantages are and how they are positioned to capture certain parts of the market.

Table 2: Summary of the competitive positioning of the five largest euro stablecoin issuers.

Please note that none of the entities has truly large distribution powers. Should a company, such as social media (e.g. Meta), large FinTech (e.g. Revolut), or a large retail bank (e.g. consortium of banks), enter the euro stablecoin market, the prospects for any of the above would most likely be quite bleak. The existing issuers would need to truly consider their positioning in the overall market and any actor that was not sufficiently capitalised for growth & liquidity would face a very hard time, most likely having to focus primarily on the on/off-ramping and DeFi access experiences.

There Is Not Enough Competition

The competition, with the exception of Circle and SG-FORGE, is primarily all crypto-adjacent.

EURC is the biggest wild-card of all, as it is very hard to quantify how well they could penetrate into new use cases; Circle has shown it is willing to put in the effort and it is also building its own payment network that – if successful – would most likely become a EURC-only venue.

However, none are truly positioned to serve the market of money. While some of the current stablecoins will probably, through hard work and consistency, emerge as the winner within DeFi (though the large-distribution actor risk remains), it is not so clear that any of the current stablecoins could win the broader market for money.

Borrowing from the ECB, the payment use cases for the digital euro are:

• Business-initiated
• Machine-initiated
• Government payments
• Person-to-person
• Physical store
• E-commerce

By mapping the current issuers’ focus against the ECB’s list, a significant gap appears: The current cohort of euro stablecoins are only actively positioned to compete in the Person-to-Person/E-commerce categories if they partner with the right actors. None are equipped for the high-value business payments which hold the key to the massive revenue potential shown in Table 1.

Business-initiated payments would require wide-scale distribution and interoperability with those businesses’ current systems, or large cost-savings coupled with seamless legacy system interoperability. None of the existing offerors could provide this. A consortium of banks would most likely be the best candidate to fulfil this role.

Machine-initiated payments would likely follow the canonical stablecoin their parent organisation is using (see above paragraph).

Government payments would require IBAN-scale distribution and therefore are most likely not viable for competition for at least a decade.

Person-to-person payments require both persons to be accepting of the payment method. This could be achieved in local markets by almost any player with sufficient GTM (e.g. WeChat in China, MobilePay in Finland, Cash App in the US…). These businesses would not need to be necessarily stablecoin driven, as seen from attempts like Sling Money. They could simply partner with an existing stablecoin for sufficient rev share. Alternatively, a social media giant like Meta could capture these markets quite easily, as could banks that have a large footprint in a given locale (e.g. like Mobile Pay did in Finland).

Physical stores aim to make payment as easy (and cost efficient) as possible. Therefore, they would likely accept what is used for person-to-person payments. The same logic would apply to e-commerce with the caveat that these systems could more easily accept any stablecoin (with sufficient resources to have integrated with said e-commerce systems) as the device can automatically detect what is available, unlike at POS today.

The ECB’s use cases do not include personal/corporate finance which is – mostly – the sole focus of all euro stablecoin issuers today. The focus is most likely for a reason; it is much easier to “sell” to existing participants of an existing system (degens on blockchains) than it is to net new customers. The latter requires large technical integrations, education, and long timelines. It must be more of a top-down process, rather than a bottom-up process. And accessing that top layer of decision makers in companies where you could make an impact is hard.

So no, there is not too much competition in euro stablecoins. There is just the wrong kind of competition, with too many small players fighting for a small piece of the “crypto” pie, and not enough well capitalised actors prepared for the massive, non-crypto “payments” market.

* Data cross-referenced against ESMA’s interim MiCA register of EMT issuers and Anchored Coins (AEUR) & Stasis (EURS) have been replaced with Angle’s EURA and StablR’s EURR, respectively, as the former cannot viably operate their business as unlicensed entities whereas Angle could fall under DeFi exemptions under certain interpretations.