German Asset Manager DWS to Issue Euro Stablecoin Along with Galaxy
To uphold the token’s value, stablecoin issuers often reserve cash or liquid assets. Amid rising interest rates, DWS is poised to manage the reserves for the new stablecoin.
Deutsche Bank’s DWS Group, along with Dutch market maker Flow Traders Ltd. and crypto fund manager Galaxy Digital Holdings Ltd, is set to establish a new entity named AllUnity. The primary objective of AllUnity is also to issue a euro-denominated stablecoin, aiming to foster wider acceptance of tokenized assets in mainstream finance.
The company, headquartered in Frankfurt and led by Alexander Höptner, former BitMex CEO, plans to apply for an e-money license with Germany’s financial watchdog, BaFin, with the ambition to launch the stablecoin within the next 18 months.
Drawing on their collective expertise in both traditional and crypto markets, the consortium aims to create a successful stablecoin tailored for institutions, corporates, and private users. DWS, majority-owned by Deutsche Bank, oversees assets totaling €860 billion ($927 billion), while Flow Traders, active in the crypto space since 2017, traded assets worth €2.8 trillion ($3 trillion) in the first half of the year.
For the Euro stablecoin launch, the DWS Group has partnered with Galaxy Digital. Galaxy Digital, led by renowned investor Michael Novogratz, offers a range of services, including crypto trading, asset management, and mining. Speaking on the development, Höptner further said:
“You need to have the stability, the trust, the connection and market power to make stablecoins really viable and usable. This partnership is pretty unique because it combines the trustworthiness of a big asset manager, that of a highly successful market maker and of a leading innovator in the crypto sector.”
Growing Focus on Euro-Backed Stablecoin
In a strategic move, Deutsche Bank’s DWS Group, Flow Traders, and Galaxy Digital plan to create AllUnity, a Frankfurt-based company, to issue a euro-denominated stablecoin. The collaboration reflects a growing trend among major institutions entering the stablecoin market, catering to crypto’s widely traded tokens often pegged one-to-one with traditional assets like the dollar.
To uphold the stability of the token, issuers of stablecoins usually reserve a certain amount in cash or liquid assets, like US government securities. With the current upward trend in interest rates, this model has proven to be a profitable venture for stablecoin issuers. The intention is for DWS to oversee the reserves of the planned stablecoin, as stated by Höptner.
Stablecoins, known for their low volatility, appeal to traders and businesses for various use cases, including swift cross-border transactions and facilitating digital payments. While the stablecoin market has reached $130 billion, the dominance of dollar-backed tokens, notably Tether’s USDT, is evident. Besides, Euro stablecoins have seen lower demand, with monthly trading volumes averaging $90 million compared to $600 billion for USD stablecoins.
Societe Generale’s crypto asset subsidiary recently introduced its euro-denominated stablecoin, EUR CoinVertible, on the Bitstamp crypto exchange. The European Union’s new cryptoasset regime provides a regulatory framework, potentially driving greater adoption of euro-denominated tokens. AllUnity plans to launch in Q1 2024, contingent on regulatory approvals and obtaining a full e-money license.
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