Binance halts trading on euro-pegged stablecoin AEUR as it surges over 200%

The anchored euro (AEUR) stablecoin, which is supposedly pegged to 1 euro, surged over 200% on Dec. 5 after being listed on the crypto exchange yesterday.

Throughout most of the day, the AEUR-USDT trading pair hovered around $1.08, aligning closely with the prevailing EUR-USD exchange rate, as per Binance‘s trading data. However, at approximately 17:45 UTC, the token’s value began to climb rapidly, accompanied by high trading volumes, reaching a peak of $3.25.

Binance responded to this unexpected volatility by halting trading of the token, as announced in a later X post.

AEUR is issued by Anchored Coins, a Switzerland-based subsidiary wholly owned by Singaporean investor and ex-parliamentarian Calvin Cheng, as stated in an earlier press release this year. Also, per the project’s website, the token’s value is backed by euro fiat assets and boasts a market capitalization of $5 million.

The cause behind this abrupt price increase remains unclear. However, the token’s relatively low market cap and limited liquidity could render it susceptible to de-pegging and potential price manipulation.

This incident highlights the inherent risks associated with stablecoins, which are not immune to periods of price instability on exchanges. According to a report by Moody’s Analytics, large-cap fiat-backed stablecoins have experienced de-pegging incidents 609 times until mid-September 2023, influenced by various macroeconomic and coin-specific factors.

This latest event also coincides with the U.S. Securities and Exchange Commission (SEC) closely monitoring traditional firms looking to issue their own stablecoins amidst an unclear regulatory framework in the U.S.