The starting position in the stablecoin market looks like this: US providers such as Tether and Circle dominate the market, and their dollar stablecoins dominate the transaction business for which these financial products are used as dollar equivalents. Euro stablecoins have not played a noticeable role to date, even though the MiCA Regulation, as a supplement to Mifid, provides an independent EU framework for crypto assets for the first time and regulated euro stablecoins are coming onto the market. However, volumes remain low – even though eleven companies are now authorised as issuers of e-money tokens in the EU.

Decentralised stablecoins have so far been excluded from EU regulation, even if, according to Michael Wild from the Digital Euro Association (dEuro Association), they would in principle qualify as crypto assets or e-money tokens under MiCA. „However, MiCA only applies if no other regulation such as Mifid applies – and under Mifid II, decentralised stablecoins are not classified as a financial instrument because they do not securitise ownership rights to an entity or are linked to repayment obligations. And Mifid only covers financial products wherever a central counterparty is legally anchored as a limited liability company or public limited company.“

With the dEuro as the first decentralised stablecoin with the euro as the reference currency, the Swiss association (dEuro Association) led by Wild as Managing Director is breaking new ground. The launch was at the end of March. The model requires some explanation: users generate the stablecoin independently via the blockchain as soon as they have deposited digital assets as collateral in the app. And from there, the wild DeFi journey begins, with the dEuro allowing for one important aspect: Unlike centralised stablecoins, where interest payments are not allowed according to MiCA, decentralised variants like dEuro can grant interest.

However, the spectrum of the dEuro is broader and comprises three pillars. It starts with the „Saving“ module. Anyone who has purchased the dEuro deposits the funds as collateral on the platform and receives interest in return – currently 10%. For the second pillar, „Equity“, you have to delve deeper into the design of the ecosystem: nDeps tokens can be purchased, which securitise the holders' rights to the protocol itself as „protocol shares“ – after all, it's all just code, which is analogous in structure to the email that flows via digital channels.

The nDeps act as a regulating unit in the DAO (Decentralised Autonomous Organisation) cycle and are referred to as governance tokens, which are then used to determine structures in the DAO with the voting rights: How much interest should be paid? What fees are charged when listing collateral? And how much will be retained when securities are liquidated? This is clarified in votes in the DAO – whereby anyone with voting rights can request such votes. Such DAO structures have been tried and tested in DeFi for years. The results are not always brilliant, but they are fundamentally functional in their similarity to traditional processes of public limited companies such as the Annual General Meeting (AGM) with voting – except that in DeFi there can be an AGM every day.

The third pillar of the ecosystem is lending. Anyone who borrows dEuro and deposits Bitcoin, Ether or another tokenised financial instrument as collateral can then use the stablecoin as they wish. This is important for the cash cycle in DeFi, as stablecoins guarantee a reliable value with their reserve and collateralisation, which can be used for other on-chain trades. You can receive up to 30% credit on your deposited bitcoins in the app, meaning that your bitcoin balance becomes liquid without you losing ownership of it. In return, however, the user must always be liquid when market prices change. This is because there may then be margin calls (threshold values are defined by the system). In other words, the collateral must then be topped up. If this does not occur within a predetermined period, the platform collects the collateral and releases it for auction. This can then benefit the holders of the governance tokens for future distributions and offset the loan amount lent.

The basic software protocol was developed in Switzerland. The docking ecosystem is being driven forward by the dEuro Association with Michael Wild as Managing Director, and DFX founder Cyrill Thommen as Chairman of the association. Thommen has already launched a Swiss franc stablecoin on the market. The foundation is essentially a subsidiary of DFX AG, which as a regulated on/off ramp can also make deposits and withdrawals of fiat money (Swiss francs and euros), says Wild. This means that DFX is, on the one hand, the main financier of dEuro by providing the initial budget and, on the other hand, a service provider for setting up functionalities such as payment transactions.

The next special feature: there is a stablecoin and two other tokens on the dEuro platform: In addition to the governance token with voting rights and dividend entitlement, there is the Deps token, which is designed like a preference share, meaning it is entitled to dividends but without voting rights.

„This token will later be listed on crypto exchanges so that investors outside the app incentives can also participate in the development.“ The great added value of the Deps is the distribution of the profits that the holder receives from the protocol as well as the hopefully expected price increase of the token, says Wild.

Listings on centralised (CEX) and decentralised (DEX) trading venues such as Uniswap and others are scheduled for the end of the second and third quarter. Towards the end of the year, Wild hopes to have finalised partnerships, whereby an agreement with a service provider for the tokenisation of assets is imminent. This will allow the universe of deposit options for mining (minting) stablecoins to grow and, above all, the rapid provision of collateral to be expanded. Major crypto exchanges have already shown interest in integrating the decentralised stablecoin into their platforms and wallets. The protocol is also currently in the process of attracting further investors for the equity pillar and for liquidity (savings) in order to continue scaling as quickly as possible, as dEuro is already larger and more profitable than comparable centrally launched competitors, according to Wild.

Following on from the partnerships, Michael Wild is currently in the process of getting the first institutional investors interested in the platform so that dEuro can attract additional liquidity to the platform by attracting digital asset-savvy asset managers. The critical mass of over 100 million euros should be reached in 12 to 24 months. After just six weeks, there are already assets worth 2.6 million euros on the platform, with reserves totalling 3 million euros. „This means that the platform is already profitable for existing nDeps and Deps token holders.“