Euro stablecoins will reach €1.1bn by 2030, says S&P Global Ratings

Dollar-backed stablecoins may be hot, and that’s well-established by now. But their Eurozone-issued counterparts are also expected to surge massively, according to a new report.

S&P Global Ratings said in a Tuesday note that top European banks are likely to issue euro-pegged digital tokens this year, with the market to surge from €650 million to €1.1 billion by 2030. That’s $768 million to $1.2 billion.

It won’t be payments that push the growth of the digital assets, but rather tokenisation of real world assets, the researchers added.

“Stablecoins’ emergence and growth presents established banks with both potential revenue opportunities and a threat to their traditional roles as intermediaries — which could be supplanted by non-bank platforms,” the report read.

Large banks have realised that stablecoins are growing so are fast embracing the tech to keep up. Major lenders, companies and even governments now want to issue the digital tokens since new regulations came into force last year.

Stablecoins are a $305.2 billion market, according to DefiLlama data, with Tether’s USDT token the biggest player in the sphere. But since regulation became more clearcut, mainstream firms like PayPal, BlackRock, and Fidelity have released stablecoin products.

Tokenisation first, payments second

Stablecoins are a lucrative venture. Banks will earn fees via their institutional clients dealing in blockchain-based assets and stablecoins will increasingly be used to settle transactions, the report said.

The US is already ahead of the game when it comes to tokenisation. Wall Street titan BlackRock CEO Larry Fink has frequently spoken about the tokenisation of assets as the future of finance.

“The tokenisation of asset classes offers the prospect of driving efficiencies in capital markets, shortening value chains, and improving cost and access for investors,” he said in 2023.

And earlier this month, the New York Stock Exchange said it was developing a platform for tokenised versions of stocks and exchange-traded funds to allow instant settlement, 24/7 trading — with stablecoin-based funding.

But the Eurozone will catch up “from a fast-follower advantage”, the report noted, underpinned by the clear regulation provided by European Union’s Markets in Crypto-Assets regulation, or MiCA, and “momentum in stablecoin adoption.”

Still, payments will play a part in the growth of euro-pegged stablecoins as banks see the benefits of using the blockchain-based tokens to speed up transactions.

Overcoming regulatory hurdles

11 European banks have already joined forces to launch a euro-denominated stablecoin — expected to be released this year.

Comprehensive regulation of the tokens via MiCA — described as “one of the world’s most comprehensive stablecoin regulations” by S&P Global — is what got banks interested in the tokens, said S&P Global.

Now, with clear-cut rules in place, growth should accelerate as institutions move towards the world of tokenisation, S&P Global added.

Mathew Di Salvo is a news correspondent with DL News. Got a tip? Email at [email protected].