State of EUR stablecoins: 2024 Update (Juuso Roinevirta)

Juuso Roinevirta posted a year-end review of the market for EUR stablecoins, explaining why they failed to grow in 2024 and will likely fail to grow in 2025. The year ended with about €320 million outstanding, and the relative share of EUR stablecoins to USD stablecoins shrank from about ~0.23% to ~0.17%. This is attributed to a general lack of interest for EUR in decentralized finance (DeFi), and the European Union (EU) Markets in Crypto-Assets (MiCA) regulation. Furthermore, most of the issuance is “pseudo-fake” in that they’re not being used on-chain, but to only facilitate trading on exchanges or simply minted to seem more important. The challenges in 2025 will revolve around the chicken and egg problem (users do not come unless there are apps won’t come unless there is liquidity won’t come unless there are users), lack of understanding, and issuer turf wars. [Read more on Juuso’s website]

Assessing the impact of a digital euro on monetary policy implementation (Banca D’Italia)

Banca d’Italia published a paper that proposes a methodological framework for estimating the maximum amount of digital euro (D€) that is consistent with a smooth monetary policy implementation (MPI) in the euro area (EA). To this end, it considers that monetary policy is implemented smoothly following the introduction of the D€ when i) the remaining aggregate liquidity in the EA is sufficient to anchor short-term rates to the deposit facility rate and ii) EA national banking sectors can largely meet D€ demand with excess reserves and additional central bank credit. It estimates that, for a smooth MPI, the maximum amount of D€ should not exceed EUR 1.7 trillion under an approach that takes into account the heterogeneity across EA countries and banks and prevents any EA national banking sector from facing a too severe liquidity distress following the introduction of the D€. The analysis suggests the importance of refinancing operations with a broad collateral framework in the Eurosystem operational framework, due to their key role in allowing the central bank to elastically withstand additional reserve demand stemming from the introduction of the D€. [Read more at the Banca d’Italia]

IZNES simulates wCBDC usage with Banque de France (Ledger Insights)

Distributed ledger technology (DLT) investment fund platform IZNES shared details about experiments during the recent Eurosystem wholesale DLT settlement trials that ended in November. It conducted two sets of experiments that used the Banque de France’s wholesale central bank digital currency (CBDC). [See below and read more at IZNES]

• In collaboration with Generali as investor, AXA IM as issuer / asset manager of the tokenized fund, and BNP Paribas’ Securities Services business providing existing services and managing its clients’ wallets in BdF’s DL3S, the experiment focused on the subscription of fund units using Banque de France’s wholesale CBDC.
• Partnering with Generali as investor, OFI Invest AM as issuer / asset manager of the tokenized fund, Societe Generale and Societe Generale-FORGE, this stream demonstrated the wholesale CBDC’s capabilities in a complex, multi-layered financial operation. This included the subscription of fund units in wholesale CBDC, which were subsequently reinvested into other funds, and bonds issued by Societe Generale. It concluded with the redemption of positions. Societe Generale Securities Services acted as Paying Agent.

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• The Central Bank Payments Conference (Paris, February 17–19) will explore the latest issues and developments confronting central banks and their evolving role as operators, overseers, and catalysts within the payments landscape. The focus will be on cross-border payments, CBDC and tokenization, open finance, instant payments, and financial inclusion, among other topics. [register here]
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And just a reminder that I produce a monthly digest of central bank digital currency (CBDC) developments exclusively for the official sector. So (only) if you work at a central bank, ministry of finance or international financial institution (e.g., the BIS, IMF, OECD, World Bank) and who would like to receive it by email on the first business day of every month, please DM me on LinkedIn or email me at john@kiffmeister.com.