Background

With new MiCA-compliant stablecoins arriving at pace to the market, a European Stablecoin Interchange (“ESI”) becomes both possible — due to uniform designs — and valuable, as it can build overall system confidence, ensures efficient interchange between the stablecoins and associated fiat currency, and allows members to focus strategic efforts on more valuable long-term pursuits than simple comparative scale in today’s market.

For this reason a set of founding members is in the process of setting up a non-profit stablecoin interchange membership organisation to undertake this function and roll out over 2025.

The principal Interchange services

  • Interchange of member stablecoins. Immediate delivery of 1:1 interchange between a member stablecoin and associated fiat on relevant member accounts (within certain limits set by the members). All Interchange transactions are net-settled on a rolling basis.
  • Interchange Member Stability Quality Requirements. Ensure all stablecoin members adhere to ESI operational, technical and legal requirements to remain participating members of the Interchange.

The positive competitive effect of ESI on the market

With ESI, all member stablecoins become fully interchangeable and thus present themselves as a fully liquid stablecoin system to the marketplace.

This means the individual size of a member stablecoin becomes less challenged in terms of establishing liquidity and stability in the marketplace, and the individual member stablecoin economics and crafted competitive advantage become more determined by the use case pursued and intra-use-case competition than by pure raw-scale-based competition.

ESI also adds an extra layer of member self-regulation via membership admission and participation requirements — also adding to consumer confidence in a member’s stablecoin.

The market for stablecoins is today infant compared to the size of the traditional money and money-equivalents market by a factor of 1000x (or more). As payment and settlement rails find economic advantages in token-format use cases, the stablecoin market (and its immediate derivatives) will naturally grow dramatically. ESI allows the members to focus efforts on developing these use cases and growing positions within them — and thus grow the overall marketplace — as ESI brings a neutral, common platform of scale, liquidity and stability upon which such efforts can stand.

ESI should, more or less, aspire to be a case of coopetition principles applied to the stablecoin status quo.

Membership criteria example

  • Issuer of a MiCA-compliant stablecoin
  • Meet operational, technical and financial requirements and pass annual audits
  • Integrate the Interchange

Originally published on Medium, November 2024.