Adding aEUR to the stablecoin protocol

Summary: aEUR can grow the ecosystem, eliminate exchange rate risks and decrease the depedency on the US economy

This post uses the currency Euro (€) as an example. The ideas can be applied to other currencies aswell.

Reasons to add aEUR:

  1. exchange rate risk
    I live in Germany and earn and spend my money in Euro. If I exchange my Euro-fiat to aUSD, then my money is not stable. Depending on the development of the Euro-Dollar exchange rate, I might make a profit/loss. The exchange rate gain/loss is realized, when I exchange the aUSD back to EURO.

→ I don’t have a option to keep my money 100% stable!
→ a exchange rate gain triggers taxes. This makes usage more difficult!

  1. Growing the ecosystem
    The stablecoin market has been constantly expending. The market share of non Dollar based stablecoins is still very small. Once stablecoins become further adopted, then the demand for aEUR, aYuan, aYEN, yPound etc. might also rise. Acala could potentially create a FIRST-MOVER-ADVANTAGE! The stablecoin gernerated fees will profit the whole ecosystem!

  2. Dependency on USA
    The lack of other stablecoin options forces reinforces the Dollar as a global currency. This
    makes us all dependent on the American monetary policy.


Implementation:

  1. Honzon protocol
    aUSD is backed in excess by a crypto asset and is stabilized against the US Dollar through the Honzon Protocol. I suppose the Honzon Protocol can also be used for aEUR. Is this true?

  2. legal situation
    This is a decentralized project. However, are there any laws/obstacles that need to be considered?

7 Likes

I actually like this idea and also live in the EU.

Personally my base currency in the financial markets is always the US dollar so I have no need for this product. But I can see your perspective as to why you would like it.

I do have some minor points of order to make:

  • Would anyone actually use this. I’ve traded for years, both in London and Ireland and everyone I know uses the USD as a base currency for transactions as it’s the most accepted currency in financial markets around the world.

  • Pairs, if we were to add aEUR, this would mean we’d either need to add pairs for each product OR you would need to swap your aEUR into aUSD which imo defeats the purpose of aEUR.

  • If we start adding more pairs for aEUR, this would mean some % of people would migrate their liquidity to those pools which would in turn lower the liquidity in the aUSD pools which in turn would hurt traders + users.

  • Lastly, my person opinion on EU and US monetary policy, Yes what the Americans are doing now is crazy. But remember in the ECB / EU we’re actually much worse than the US. Our monetary policy will consist of a low interest rate environment for far longer than the US will hold out. War in the Ukraine is also hurting the EUR and personally I think this conflict is here to stay.

TLDR: I like the idea, but I don’t think it would add enough value to the platform for the work required to get it off the ground. :watermelon:

2 Likes

Thank you for putting thought into my proposal.

I agree that at this point in time the demand for aEUR might be rather low and the implementation would lower the liqudity.

However, this idea might be valuable to implement further down the road!

If non american companies take out loans in aUSD, then they would have to hedge against the exchange rate risk. For local companies it is normal to take out loans in the local currency.

This leads me to the following conclusion: If Defi becomes more accepted and connected with our old financial system, then there will be demand and a usecase for this product.

2 Likes