Monerium is to become the first crypto player to have access to the Forex market. The Icelandic company could become a force to be reckoned with, both in the crypto world and in traditional finance.

Monerium may not be the best-known company in the ecosystem, but this small Icelandic start-up (with around 30 employees) is making rapid progress. At EthCC, the major European event for the Ethereum universe, it announced in early July that it will soon be able to connect to Forex, the international currency market, which should help many players in decentralised finance (DeFi).

In fact, automated market making (AMM) protocols and decentralised exchanges (DEX) such as Uniswap often have very wide spreads when you want to exchange stablecoins in euros for stablecoins in dollars, for example. For this type of activity, traditional foreign exchange markets are still much more efficient than their blockchain equivalents. But Monerium could well solve this problem.

Concretely, if you want to exchange 100 million stablecoins in dollars, you can get the equivalent in stablecoins in euros at the rate on Forex, the international currency market. How does Monerium achieve this? Quite simply because its regulatory licences give it access to Forex. It is the only "crypto" player in this case.

"Nearly $8 trillion is traded every day on Forex," explains Gísli Kristjánsson, co-founder and Chief Technical Officer (CTO) of Monerium. "Our goal is to give our users access to this liquidity by providing regulated access for it."

This new functionality, which will be available in the third quarter of 2024, could boost its in-house stablecoins (EURe, USDe and GBPe), which are central to the mechanism. The largest of these, the EURe, has a capitalisation of "just" €15 million.

A player little known to the general public but a trailblazer

The Monerium story began in 2015 under the aegis of two of its co-founders, Jón Helgi Egilsson, former chairman of the supervisory board of Iceland's central bank, and Sveinn Valfells, the current CEO. "It was when we saw Ethereum arrive in 2015 that we realised that the future of traditional currencies would be on public blockchains", he explained at the end of March to The Big Whale.

The company opted for regulation early on by obtaining an electronic money institution (EME) licence in 2019 to issue stablecoin in the European Union. A winning bet, because it is this precious sesame that has been mandatory since 1 July 2024 for anyone wishing to issue and distribute stablecoins in Europe. To date, Monerium is one of the only players, along with the giants SG-Forge (a subsidiary of Société Générale) and American Circle (which issues USDC and EURC), to hold this licence.

"If you want to issue the equivalent of traditional currency on blockchain, regulation is inevitable," stresses Sveinn Valfells. "For us, the e-money framework appeared to be the simplest and safest regulatory means of issuing a stablecoin," he continues.

Monerium completes its stablecoin offering with the possibility of obtaining an Icelandic IBAN, making it possible to connect the crypto world and traditional finance in just a few clicks. This product is probably one of the most effective for on/off ramp in Europe. Monerium does not charge any fees on transactions.

According to our information, the company mainly makes money by providing its infrastructure to institutional players wishing to integrate this mechanism and by investing part of the reserve of its euro stablecoin. It currently claims to work with 2,500 customers, including around a hundred companies.

In the longer term, Monerium intends to become a benchmark regulated platform to bridge the gap between the financial world and decentralised finance. The company likes to present itself as akin to Revolut or Wise, which revolutionised the currency market by breaking down prices, but offering the advantage of Web3 that allows anyone to connect to its services.

But the battle will be tough: according to our information, other stablecoin issuers are working on a similar proposal.

This analysis does not constitute investment advice. It has been written without taking into account your personal circumstances, including your financial situation, risk profile and investment objectives.

Before investing in any product, investors should fully understand the risks involved and consult their own legal, tax, financial and accounting advisors.