The Gap Between Euro and Dollar Stablecoins Reaches 300 to 1

In the global financial market, the gap between the dollar and the euro is about 3 to 1, but in the blockchain ecosystem, it has widened to over 300 to 1. This is because the dollar-centric decentralized finance (DeFi) infrastructure is preventing the on-chain influx of euro funds. The implementation of the European Union's (EU) Markets in Crypto-Assets Regulation (MiCA) and the expansion of euro-denominated real-world asset (RWA) markets could potentially narrow this gap. Currently, the supply of euro-pegged stablecoins stands at €71 million, which is less than 1% of the total supply of stablecoins in dollar terms. The euro accounts for about 20% of global foreign exchange reserves, while the usage of dollars in the real economy is approximately three times that of euros. The dollar-centric structure of the digital asset market and exchange rate risks are obstacles for European investors. Currently, the cost of hedging dollar assets into euros is about 1%, which lowers the yields on dollar-denominated products. Recently, the assets under management of euro-based DeFi vaults have increased from €12 million to €135 million, and the supply of euro stablecoins has also reached an all-time high. With the implementation of MiCA reducing regulatory uncertainty, the influx of European institutional funds on-chain is being highlighted as a key variable that could narrow the gap.

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