USDT exits the market, EURC fills the gap, and the euro-denominated stablecoin surges by over 170% against the trend.

Author: Jae, PANews

While the global stablecoin market, worth over $300 billion, is dominated by US dollar assets with a 99% share, a niche category is quietly making a comeback.

According to Dune data, the total market capitalization of euro stablecoins recently broke through $400 million, a historic milestone, with a growth rate of over 170% since the beginning of the year.

Despite the sheer size of dollar-denominated stablecoins, euro-denominated stablecoins, representing only 0.14% of the global market, are a force to be reckoned with. Against the backdrop of increasingly stringent requirements under the EU's Crypto Asset Markets Act (MiCA) and tightening regulatory barriers, this surge in figures suggests a profound liquidity reshaping is underway within the Eurozone's crypto ecosystem.

A silent on-chain euro war may have already begun, which could be a turning point for euro stablecoins to move from the margins to the mainstream market.

Providing compliance access, regulatory certainty becomes a driver of growth.

The most perplexing aspect of the counter-trend growth of euro stablecoins is the regulatory pressure behind it. From a traditional financial perspective, stringent regulation usually implies limited market activity. However, market logic often contradicts intuition: strict rules can actually eliminate uncertainty regarding capital inflows.

Following the collapses of FTX and Terra, global capital's fear of unlicensed assets far outweighs its resistance to strict regulation. While MiCA sets thresholds, it also provides a compliant entry ticket for large financial institutions and stablecoin issuers.

Prior to the full implementation of MiCA, the euro stablecoin market was fragmented due to inconsistent regulations across member states. In June 2024, MiCA's provisions on stablecoins officially came into effect, requiring issuers to obtain permission from the electronic money institution or credit institution of an EU member state.

In essence, this extremely high entry barrier acts as a scavenger. Under the MiCA framework, non-compliant stablecoins that cannot meet the requirements of 100% reserves, monthly third-party audits, and full redemption at any time must withdraw from the European market.

The market was thrown into turmoil, and stablecoin giant Tether was forced to withdraw from the European market. This significant supply-side clearing created a huge vacuum for compliant issuers like Circle. Dune data shows that in the 18 months following the implementation of MiCA, the monthly trading volume of major euro-denominated stablecoins surged from $197 million to $3.1 billion, an increase of approximately 15.74 times.

More importantly, MiCA introduces a "passport" mechanism, allowing any issuer licensed in one member state to operate throughout the EU. For leading European CEXs (centralized exchanges) and crypto asset service providers (CASPs) such as Bitstamp and Bitpanda, delisting non-compliant USDT trading pairs and switching to MiCA-compliant euro stablecoins (such as EURC) is not only a regulatory compliance requirement but also a necessary measure to circumvent potential sanctions. Clearly, regulation has transformed from an optional action into a survival necessity, directly driving substantial growth in the scale of euro stablecoins.

From risk hedging to arbitrage allocation, another catalyst for scale growth.

Currency appreciation is another major implicit pillar supporting the growth of the euro stablecoin market. Between the end of 2024 and 2025, fluctuating US inflation expectations and the resilience shown by Eurozone macroeconomic data constitute the underlying logic for the euro's appreciation against the dollar.

For investors in the crypto market, holding euro stablecoins not only meets the need for on-chain hedging, but also serves as a means of foreign exchange arbitrage and diversification.

When the euro appreciates against the dollar, conservative capital often chooses to shift funds to euro-denominated assets to hedge against the risk of a weakening dollar. Investors holding euro stablecoins will gain additional purchasing power gains on their fiat currencies, without changing the face value of their assets. For European investors, especially institutions that need to hedge cross-currency risks, converting some idle dollar stablecoins into euro stablecoins not only mitigates single-currency risk but also captures the positive returns from exchange rate fluctuations.

During this specific macroeconomic cycle, due to the positive contribution of exchange rate expectations, the holding cost of euro stablecoins was actually lower than that of dollar stablecoins. This exchange rate arbitrage has also indirectly increased the size of euro stablecoins, creating a strong influx of passive funds.

Furthermore, concerns about over-reliance on the US dollar settlement system have intensified globally this year. In particular, changes in US tariff policy and geopolitical instability have prompted some international trading entities to seek alternatives. As the world's second-largest reserve currency, the euro, in its digital form—the euro stablecoin—has become the preferred choice for non-US entities conducting on-chain cross-border settlements.

Chainalysis data indicates that after April of this year, with the implementation of US tariff policies, a significant trend of shifting from USD-denominated to EUR-denominated currencies emerged in the market. During this period, the trading volume of EURC increased far more than that of USDC, reflecting the market's urgent need for diversified foreign exchange reserves.

With a multi-chain strategy and application-based approach, EURC has captured 70% of the market share.

With a market presence of $400 million in euro stablecoins, Circle has once again demonstrated its dominance as a compliance giant.

According to Dune data, the supply of EURC issued by Circle is approaching $300 million, accounting for about 70% of the market share on its own, making it the main engine driving the growth of the entire euro stablecoin market.

Circle's leading position lies in its precise early planning. Before the MiCA framework was implemented, Circle proactively obtained a license to operate as an electronic money institution in France, accepting regulation from the French Prudential Regulation and Clearing Authority. This made it the first mainstream player to be "licensed" after the MiCA framework came into effect.

EURC's reserve transparency is the cornerstone of its user trust. According to its publicly available audit report, EURC's reserve management meets the highest standards of the MiCA framework.

However, compliance is merely an entry ticket; seizing market share requires an ecosystem. EURC has not limited itself to the Ethereum mainnet but has launched a multi-chain expansion strategy.

• Ethereum: The main platform for large-scale institutional settlements, handling approximately 60% of the circulating supply.
• Base: Leveraging Coinbase's massive retail user base, EURC's application scenarios on the Base chain have rapidly expanded to small-amount payments and everyday social consumption.
• Solana: With its extremely high TPS and low fees, it has become the top choice for high-frequency forex trading and arbitrage.
• Stellar's deep integration with payment giants such as Visa and Wirex enables EURC to achieve 24/7 real-time settlement and optimizes the cost structure of cross-border remittances.

The real breakthrough may occur in application scenarios. On December 12th, EURC announced its integration into the World App, which has 37 million users, potentially injecting a huge retail boost into it, allowing users to send EURC directly within the chat application.

As a market leader, the expansion of EURC has directly driven a qualitative change in the overall scale of euro stablecoins. As liquidity accumulates to a certain threshold, EURC is transitioning from a store of value to a payment medium. Visa is now using EURC for settlements on the Stellar network, potentially marking the formal entry of euro stablecoins into the infrastructure layer of mainstream finance.

With established banks entering the market and CBDCs also eyeing it covetously, the banking sector is poised for action.

Circle is not without its challenges. As the market grows, traditional financial giants begin to enter the fray. The EURCV issued by SG-FORGE, a subsidiary of Société Générale, is a prime example.

Unlike EURC's Web3 DNA, EURCV has a pure banking lineage, and its initial development goal was to provide a compliant on-chain cash tool for tokenized securities and retail payments. Payment giant DECTA released a report indicating that EURCV's transaction volume grew by 343.26% in 2025, primarily due to its adoption in European institutional repo agreements and bond tokenization clearing.

Compared to EURC, EURCV's credit backing comes directly from top-tier commercial banks, which is an unparalleled advantage in traditional financial scenarios where counterparty risk is extremely sensitive.

Besides Société Générale, several other European banks, including Santander Bank of Spain, have also launched stablecoin experiments this year. These "bank-backed stablecoins" leverage the huge existing deposit base of banks and may unleash powerful on-chain migration capabilities at some point in the future.

Meanwhile, pressure from the public sector continues to loom over all market participants. The ECB's push for a digital euro (CBDC) represents the biggest uncertainty facing privately-owned euro stablecoins.

European Central Bank (ECB) Executive Board member Piero Cipollone has emphasized that a public form of digital cash is necessary to maintain European monetary sovereignty. Yesterday (December 18th), ECB President Christine Lagarde also stated that the ECB has completed preparations for a digital euro, awaiting only action from political institutions.

Compared to euro-denominated stablecoins, CBDCs have inherent advantages in terms of legal status, holding limits, and infrastructure access. If CBDCs can offer greater user convenience and a zero-cost structure in the future, they could directly impact existing euro-denominated stablecoins.

The ECB's deeper concern lies in financial stability, and it has consistently expressed skepticism about the potential for deposit runs triggered by stablecoins. According to the ECB's analysis, if a large amount of retail deposits were converted into euro-denominated stablecoins, it could weaken the lending capacity of traditional banks. Furthermore, because stablecoin reserves are concentrated in banks, a wave of on-chain redemptions could cause instantaneous liquidity pressures on the banking system.

To mitigate this risk, MiCA will impose stricter regulations on euro stablecoins, requiring them to increase their reserve ratio with banks to 60%. These continuously rising compliance costs may limit the expansion momentum of euro stablecoins in the future.

This creates a fundamentally contradictory narrative: euro stablecoins are thriving within a compliant framework, while their regulators are actively planning a CBDC that could potentially replace them. This competition and cooperation between the "government" and the "private" will be the biggest variable for euro stablecoins in the coming years.

The rapid growth of euro stablecoins may indicate a long-term trend: as regulatory dust settles, global investors are no longer satisfied with just dollar stablecoins, and the niche of euro stablecoins is being rapidly filled.

Meanwhile, with the further development of RWA (Real-World Asset) tokenization and cross-border settlement needs, euro-denominated stablecoins may be on the eve of large-scale adoption. And this game, dominated by Europe, has only just begun.