Stableecoins continue to grow to a pillar in both the cryptocurrency world and the global financial system. The market has already surpassed $ 235 billion and shows that people have faith in the future of these assets.

Currently, two USD supported stableecoins (USDT and USDC) have approx. 90% of the market. The rest of the top-10, including USDE and PYUSD, are all dollar-denomined. Euro-based stableecoins have little market share for comparison. Why is it?

There are many discussions about regulation, interoperability and integration with Tradfi. However, the only most important factor is liquidity. Without deep and sustainable liquidity, no stableecoin can get mass traction and no amount of regulatory clarity will change it.

What is the problem of non-USD stableecoins?

Let’s take the euro as an example. EUR-stacked stablecoins have been around for years at this time, yet they hardly remain used. It is mainly due to liquidity challenges. This is what ultimately decides whether a stableecoin can be a widely used financial tool.

For years now, USD-supported stableecoins such as USDT and USDC have been the dominant power of this landscape that acts as the primary source of liquidity in lending pools and trading pairs. USD-backed stableecoins have deep liquidity, high trading volumes and extensive integration across CEFI/Defi platforms.

In contrast, the euro (and other non-USD) is suffering from a lack of market mechanisms that can maintain them. There are simply not enough trading pairs, users and financial instruments built around them to create a proper liquidity ecosystem like what USD stableecoins have.

One of the main causes of this liquidity gap is that centralized market producers do not see enough financial incentive to provide liquidity to Euro stableecoins. It is simply not profitable enough for them. So they prioritize other assets and leave EUR-stacked stablecoins on the back foot.

This is not just a matter of preferences – it is a more basic question that is financial. If market manufacturers cannot make a decent return by providing liquidity to these assets, they do not assign capital to them.

So how can this change?

Is regulation key or just a side factor?

An argument can be made that if other jurisdictions go ahead with regard to establishing clear rules, non-USD stablecoins will become much more attractive. For example, the introduction of MICA rules in the EU has paved the way for compatible EUR-stacked stablecoins such as EURC, making them an increasingly viable alternative to consider when integrated with tradfi.

To some extent I agree. As various jurisdictions around the world continue to move towards better regulation of digital assets, we may well expect more stablecoins to be tied to local currencies to start clapping. In Asia, the Middle East, Latin America – regions that would tend to use such assets to improve their financial stability. In addition, it would also help them lower the dependence on the US dollar.

We actually have supporting examples here, such as Singapore’s XSGD or Switzerland’s XCHF. Hong Kong also launched an HKD-Pegged Stablecoin in December 2024. The trend seems clear.

However, regulation alone is not the decisive factor. EUR-stacked stablecoins existed before Mica joined. And it is still unclear whether the frame will eventually help or prevent their adoption in the long run. Mica could act as a kind of “restriction” on USD-supported stableecoins in Europe. Potentially, this euro stablecoins give an unreasonable advantage rather than making them really competitive on their own benefits.

And at the end of the day, regulation cannot solve the more basic question of liquidity. Without it, no regulatory framework can make a stableecoin viable enough for broad use. So the question is: How can we create liquidity for non-USD stableecoins?

Addressing liquidity restrictions

To put things into perspective, the market value of USDT and USDC stands at $ 141 billion and $ 56 billion respectively. In comparison, Euro-based stableecoins such as EURC or EURS are hardly over $ 100 million. The pure gorge is obvious and it directly affects their applicability. There are fewer trading pairs, fewer defi integrations and ultimately less incentive for dealers and institutional players to adopt them. As a result, they cannot become mainstream assets.

A case could be made to Eure, which I personally use a lot and seem to be the most practical euro-stablecoin for use in the real world. Still, the wider non-USD stableCOin market is still facing the same challenges: limited adoption, fewer integrations and a long way to go before they can compete with dollar-backed colleagues.

A possible solution lies in developing more effective liquidity algorithms for non-USD stablecoins. Addiction to professional market manufacturers has proven to be ineffective, so a new approach is needed with mechanisms that can ensure strong liquidity without relying on these parties completely.

A more effective approach, in my opinion, would be to first establish deep liquidity pools between USD and non-USD stablecoins. This is the most practical way to ensure smooth conversions as it would directly solve the core problem. But it requires refining Automaticed Market Maker (AMM) algorithms to make liquidity regulations more efficient and attractive to providers.

The way to viable non-USD-stablecoins

What matters most is how much liquidity providers can serve. If the incentives are there, liquidity will be improved and the adoption will of course follow. This is not just about attracting more capital-this is about restructuring liquidity provision in a way that ensures long-term, sustainable profits.

Without improvements to the infrastructure, Euro stableecoins and their colleagues will continue to hang behind despite their potential. Stableecoins are only as strong as their liquidity. The key is to build models that make it to give liquidity profitable – because when the financial incentives are first in line, everything else falls into place.

When I look ahead, I can see that non-USD-stablecoins gain a competitive advantage in specific use cases, such as cross-border transfers, for-chain-forex trading and decentralized loans. Companies that operate globally but need to control cash flows in multiple currencies can benefit from borrowing non-USD stablecoins while keeping their treasuries in USD.

In addition, liquidity pools that facilitate stableecoin swaps between different Fiat Church communities could serve as the value of values, potentially laying the basis for a more decentralized global financial system.