Today French startup Lugh announced the launch of a new Euro stablecoin on the Tezos blockchain, with associated bank deposits held by Société Générale and audits from PwC and Maghreb.
The announcement also says that French supermarket chain Groupe Casino (2020 revenues €32 billion / $36 bn) has plans to use the stablecoin both as a means of payment and for rewards.
We reached out to all three enterprises for confirmation. Société Générale confirmed, but we did not receive a response in time for publication from the others.
Initially, the stablecoin will only be available on the French cryptocurrency exchange Coinhouse. However, the announcement clarifies that the coin is intended as a first step for other blockchain applications that will leverage it, such as the supermarket chain.
The tokens EUR-L will be backed one for one by euros held in a Société Générale dedicated account. One question relates to the regulatory position. The startup states the coin “has been presented to the French regulatory authorities and is willing to comply with the current regulatory framework.” Lugh’s capital is €10,000.
It’s not the first euro stablecoin. In terms of regulated ones, Raiffeisen Bank has its euro RBI Coin, created in association with Billon, which holds an e-money license. And German bank Bankhaus von der Heydt partnered with Bitbond for a stablecoin on the Stellar network.
Meanwhile, the European Union is currently considering its draft regulations for Markets in Crypto-Assets (MiCA). The European Central Bank responded to the draft stating it’s keen to ensure that central banks have veto rights over stablecoin issuers. It also has concerns that stablecoins could cause problems because bank interest is in negative territory in the Euro area and holding stablecoins is cost-free. In other words, stablecoins might prove more attractive compared to bank accounts.
However, that begs the question: what’s the business model for the stablecoin issuer given it has to keep deposits in a bank account? This is perhaps why Lugh is emphasizing blockchain applications.