Euro Stablecoin Push Hits Wall of Thin Liquidity

Europe's grand crypto ambitions just slammed into cold, hard reality.

Liquidity Crunch Exposed

Market makers can't source sufficient euro reserves to back proposed stablecoins at scale. The promised 'digital euro' ecosystem faces its first major stress test—and it's buckling under pressure.

Traders report spreads widening on euro-pegged pairs, while institutional players hesitate to commit capital without clearer regulatory guarantees. The continent's fragmented banking infrastructure complicates arbitrage, creating pockets of illiquidity that defy efficient price discovery.

Regulatory theater continues—politicians announce frameworks while market mechanics quietly undermine their grand visions. Another case of finance innovators building rockets while regulators debate bicycle lanes.

Until euro liquidity deepens significantly, Europe's crypto aspirations remain hostage to traditional banking bottlenecks. So much for disrupting the system.

In theory, borrowers could arbitrage the spread — borrow where liquidity is cheap (e.g., Base) and lend where it’s scarce (mainnet). But in practice, bridging friction kills the trade. Unlike USDC, EURC lacks a native CCTP-style burn-and-mint bridge, so most flows rely on swap-and-bridge routes or CEX rails.

Portal (Wormhole’s token bridge) has been promoting EURC bridging between chains following its August launch, but even at a modest €10,000 size, transfers from Base to Solana clock in at ~33 bps, and Solana to Ethereum via Portal at ~49 bps. Base to Ethereum EURC bridges can be done for a more modest ~22 bps per via Squid router.

All of these spreads will increase with size, of course, making it difficult to bring rates in line without relying on, for example, Coinbase as an intermediary.

But this can be an advantage for the little guy with capital already in place on these chains. Jupiter’s boost lifts APYs on Solana, but the cost to MOVE funds in and out quickly discourages hedge-fund scale operations. Aave’s mainnet spikes tend to be driven by caps and a small number of large wallets, not durable demand. Risk curator Chaos Labs has twice moved to raise the caps on EURC specifically on Aave’s core instance.

A vault that rotates between chains and strategies can theoretically harvest what individual users can’t.

“The euro is one of the most widely traded currencies in the world,” Benamour said. “With yoEUR, we’re unlocking the best DeFi yield for euro-denominated stablecoins, making it easy for anyone to earn more on their assets.”

As of today yoEUR is principally allocated to Tokemak’s baseEUR vault for which yields are boosted by TOKE token emissions. That WOULD make it appealing to users who don’t want to be bothered with, or gain a tax benefit from avoiding, having to claim rewards. There can also be advantages in terms of risk management, with both concentration risk mitigated and a confidence boost from risk ratings by Exponential.

Euro stablecoins in aggregate now top $540 million in market cap. But until native cross-chain mobility arrives, and money market caps scale up, expect rates to stay weird.

• The Breakdown: Decoding crypto and the markets. Daily.
• 0xResearch: Alpha in your inbox. Think like an analyst.
• Empire: Crypto news and analysis to start your day.
• Forward Guidance: The intersection of crypto, macro and policy.
• The Drop: Apps, games, memes and more.
• Lightspeed: All things Solana.
• Supply Shock: Bitcoin, bitcoin, bitcoin.