How Europe Is Detaching Itself from the Money of the Future
Web3 Is the Future of Finance, and Stablecoins Are Its Leading Currency. Unfortunately, the EU Prohibits the Emergence of Globally Relevant Stablecoins in Europe. Without a Change in Mindset, Our Wonderful Continent Is Sliding into Complete Monetary Dependence.
Have you ever used „Web3“? It’s very easy. Buy some Ether on Bitcoin.de or another trading platform, install a wallet like MetaMask, and send a little Ether to it.
And just like that, you’re in Web3. You can now visit Uniswap to swap Ether for other tokens and provide your capital as liquidity. On Aave or Compound, you’re able to borrow and lend tokens, earn interest on stablecoins at Pendle, buy NFTs on OpenSea, and much more.
Web3 is not limited to Ethereum. Numerous „bridges“ connect Ethereum with dozens of compatible blockchains and rollups, of which Arbitrum, Base, Optimism, Solana, Polygon, and BNB are the most well-known. Through this network of blockchains, Web3 can, in principle, scale infinitely.
More importantly, Web3 platforms are fundamentally different from the traditional financial system. No platform requires you to sign up with an email address. The addresses in your wallet are sufficient. Nowhere do you have to hand over control of your coins and tokens to a middleman who could misappropriate them, since everything runs via a smart contract. There are no first- and second-class users, such as investors—every address is equal.
If you haven’t done so yet—give it a try. Very quickly, you’ll see what an enormous upgrade to the financial system this really is. Your bank accounts and stock portfolios will suddenly seem slow, expensive, insecure, and paternalistic—because they are!
The New Old Leading Currency
The leading currency in Web3 is no longer Bitcoin or Ethereum—but the dollar. Stablecoins like USDC and USDT bring the dollar onto the blockchain; there are also algorithmic alternatives like the DAI dollar, but these are far less common.
Anyone who spends just a few hours exploring Web3 and using stablecoins will realize that these are the future of money. Everything that happens within a bank account is outdated technology, which must jump through countless hoops just to accomplish a fraction of what stablecoins can do as standard.
And this brings us to the problem. The US has realized what stablecoins are—a monumental upgrade to fiat money—while the EU continues to think in old paradigms—and sees stablecoins mainly as a threat to the established financial system. The US is trying, through its regulations, to motivate domestic companies to create and use dollar-based stablecoins—while the EU is, through its regulation, trying to prevent them from doing so.
Uncertainty as a Requirement
A particularly dramatic example: MiCA dictates to stablecoin issuers how they must structure the reserves backing their tokens.
Among other things, MiCA requires that 30 to 60 percent of reserves be held at a specified number of European banks. The issue here is that these reserves, unlike the government bonds commonly used until now, do not generate interest. And the sums involved are far beyond the scope of deposit insurance, meaning the rule introduces enormous risks.
Tether, the issuer of the largest and best-backed stablecoin, commented that EU lawmakers simply do not understand how the stablecoin business works. Tether cannot comply with these rules, and as a result, EU platforms are no longer allowed to work with Tether.
The Terrible Consequences for Europe
The consequences of this misregulation are clear and inevitable, unless the regulation is relaxed.
The first consequence is that IN EUROPE, IT WILL NEVER BE POSSIBLE FOR A GLOBALLY RELEVANT STABLECOIN TO EMERGE. Competitiveness is simply banned, absurd as it may sound. Europe will inevitably become dependent on financial companies like Tether or Circle headquartered in third countries; the euro will continue to lose ground to the dollar and become even less relevant as a global means of payment; and the states and citizens of Europe will lose their monetary sovereignty. What happened with credit cards and search engines will happen with money.
The second consequence is that Europe will lose its connection to the future global financial system. In the banking system, Brussels—with Swift—is the center of global transactional activity. In the Web3 system, politicians in Brussels are prohibiting financial institutions from being compatible with Web3.
The EU has adopted rules that are nearly impossible for globally relevant stablecoins to implement. European financial institutions are technically allowed to work with Web3, but not with the leading currency of Web3. This is not only a massive competitive disadvantage but also severs them from crucial liquidity flows in the future financial system.
It’s time for Europe to come to its senses. The EU claims to support digital innovation and make the region competitive. But as long as it bans European companies from creating a globally relevant stablecoin, these claims are nothing but lip service—while the EU’s regulatory actions enforce the exact opposite.