Low-carbon Hydrogen: A Crucial Clean Energy Source

Energy

Economic

Summary:

As uptake continues, green hydrogen harbours strong potential to reduce greenhouse gas emissions and drive the energy transition.

What is the situation on the European hydrogen market and what developments lie ahead?

Hydrogen has been singled out in the EU’s hydrogen strategy and the REPowerEU plan as a promising source of clean energy. Its development will be crucial in decarbonising many energy-intensive processes, in sectors ranging from steel to shipping, aviation, and fertilisers.

Substitution of existing so-called grey hydrogen uses – in the refining, ammonia and methanol sectors – will also provide a solid foundation for the development of a low-carbon hydrogen market in Europe.

Of course some use cases will take more time to develop, either because this could compete against another low-carbon technology or as the adoption of hydrogen would require significant downstream capex and investment, but overall hydrogen offers strong potential to drive the energy transition.

How is the European Union supporting the emergence of the low-carbon hydrogen market and what are the potential challenges?

The European Union and its Member States have set ambitious targets for hydrogen deployment in Europe, aiming to achieve 20 million tonnes per annum, or Mtpa, of low-carbon hydrogen demand by 2030. This aim is fuelled by the vital need to decarbonise industry and transportation on the one hand, and the need to ensure energy sovereignty and gas supply independence on the other.

The recent Renewable Energy Directive III also set goals for renewable fuels of non-biological origin, so-called RFNBO fuels, which are derived from green hydrogen. It targets 2.3 Mtpa for industry and 0.62 Mtpa for transportation by 2030, and confirms the future development of a hydrogen market in the European Union.

However, switching to more expensive energy could dent competitiveness for EU industry, and the carbon border adjustment mechanism (CBAM), designed to create a level playing field with imported goods and materials, will also add to the costs of certain European industries. For instance, fertilisers are likely to continue to rely on natural gas and imported grey ammonia for some time.

There have been some project cancellations and few Final Investment Decisions despite an impressive pipeline of projects in the development stages. Can these targets still be achieved?

The roll-out of green hydrogen in Europe has been delayed for a number of reasons. Firstly, stringent compliance requirements for renewable fuels of non-biological origin (RFNBO) add to the cost structure of green hydrogen. Secondly, more infrastructure is needed to connect supply – where cheap green electricity is available – to demand at industrial centres. Additionally more subsidies will be required to equalise the costs for 2030 target volumes, with sources estimating that the EU Hydrogen Bank budget would cover only 15% of demand. Lastly, we are seeing the usual challenges faced by a developing industry, such as a weak electrolyser supply chain and integration risks, particularly the lack of EPC solutions, although we are seeing improvements in the supply chain with engineering firms developing EPC solutions. As a result, off-takers are broadly putting decisions on hold, despite the mandatory targets and decarbonisation mandates.

However, we are still seeing a great deal of movement in the sector, with a large wave of projects targeting Final Investment Decision within the next 12 months. Auction awards are finally being announced: this not only helps the economics for certain projects, it also paves the way for others to follow once these first projects are built, as they draw on shared infrastructure and greater confidence from investors and capital markets. In addition, progress is being made on rolling out infrastructure, especially the first segments of the EU hydrogen backbone.

So overall, the 2030 targets appear ambitious and the market needs to accelerate to reach them. This also paves the way for a larger share of imports, on condition that import infrastructure is also developed in time.

In practical terms, what makes a successful hydrogen project?

Project developers that effectively connect green power supply on one hand with demand for hydrogen or one of its derivatives on the other hand will be the most successful, and in our view three strategies in particular will be key: firstly, initiatives that integrate renewable power development to facilitate the securing of green power supply; secondly, those that integrate downstream to offer a product that can be sold into a more mature market and for which transportation and logistics are facilitated; and lastly, strategies to locate close to demand, literally on site, and develop in smaller phases so that it is technically and economically easier for the off-taker to absorb gradual increases in hydrogen supply.

Can you tell us how BNP Paribas is addressing its clients’ needs in the energy transition space?

BNP Paribas created the Low Carbon Transition Group – or LCTG – about two years ago to support and accelerate our clients’ energy transition. LCTG is a global team of over 100 bankers covering all investment banking products – from project finance and debt advisory through to equity placement, M&A and strategic advisory. It brings together all our sector experts under one roof, with backgrounds across all these areas of expertise to offer our clients the most relevant advice and the best-suited pool of capital for each individual situation.

We focus on sectors that have the most critical role to play in the energy transition. This particularly covers renewable energy, low-carbon fuels which include hydrogen and its derivatives but also biofuels, carbon capture utilisation and storage and also transition minerals and metals which include the battery manufacturing value chain.

Some of these sectors are mature and can access deep pools of liquidity – this is the case for renewables for example – but other sectors are still in the earlier stages of development and carry complex technology, market and regulatory risks. We support our clients in a range of different ways tailored to each one’s stage in their transition journeys and their varying degrees of development and maturity. We offer a full range of solutions, raising sizeable amounts of debt and equity capital for large scale offshore wind farms, as well as for the acquisition or divestment of renewable energy development platforms, while in less mature sectors, we help raise equity capital for innovative companies, in particular project developers, and provide project finance advisory to large infrastructure assets and help our clients devise bankable project structures.

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IFS

Economic

For 23 years, year after year, governments of both persuasions cut the real value of the winter fuel allowance. In 2000 it was set at £200. That’s where it stayed until this year, a reduction in its real value of nearly half. I heard not a peep of complaint over that entire period. Meanwhile, pensioner incomes grew at twice the rate of those of working age. Yet the decision to finally end this payment has caused outrage.

Our social care system has been a mess for at least three decades. Tens of thousands of people have had to give up their life savings, indeed their homes, to pay huge and uninsurable costs for their care. Politicians of all colours have lamented this fact. We have had promises, royal commissions and review after review. Finally, the Dilnot Commission proposals, that costs payable by those in need should be capped, appeared to have been accepted by all.

That’s right, appeared to have been, but the Conservatives never actually made the change. And this policy was actually the biggest casualty of Rachel Reeves’ July statement, despite Wes Streeting, now the health and social care secretary, saying only weeks before the election that Labour had no plans to resile from it. That represents a huge policy about-turn, besides which the policy on the winter fuel payments pales into insignificance.

An opposition leadership election, in which all the candidates say they want to keep taxes low and reduce the size of the state, is under way. None, so far as I can tell, has a single credible answer to how they would achieve this, which is perhaps not surprising, given the evidently shocking state of many of our public services. All, nevertheless, vociferously denounce that cut to the fuel allowance. All were part of a government that raised taxes and spending and expanded the scope of the welfare state. All want to increase defence spending, cuts to which have been just about the only reliable source of funding for other services for decades.

The new prime minister welcomes a report on the dire state of the NHS, which makes patently clear that a big part of its problem has been a lack of investment in buildings, machinery and technology, a lack that will take tens of billions of pounds to rectify — at the same time, and in the same speech, restating the absurd promise that he will not raise taxes on “working people”. There are no taxes that don’t hit working people. And if he means by working people those on average sorts of earnings, well, their direct tax bills are already lower than they have been in half a century.

A Scottish finance minister blames budget cuts on Westminster-imposed austerity when her country benefits enormously from the Barnett formula that provides for far higher spending north of the border than south of it. What we in England wouldn’t give for the higher welfare benefits, free higher education and higher public sector pay that the formula has allowed her government to provide for the citizens of Scotland with only slightly higher levels of taxation.

A government claiming a new era of honesty and transparency in public finances pretends it had no idea before the election that the public finances were unsustainable. Then it hammers home a message about an unexpected £22 billion “black hole”, much of which it knew about and had control over. And part of which — what has happened to the so-called Treasury Reserve — it simply refuses to explain. Speculation is now rife that rather than meet some of the challenges head on, it will resort to redefining debt rules, something that the chancellor seemed to rule out before the election.

Into this maelstrom of denial, obfuscation and avoidance, the Office for Budget Responsibility lobbed an enormous brick. Whatever the details of fiscal holes over which we are now quibbling, the public finances are unsustainable over the long term. You don’t have to take its precise figures too seriously — we are not going to end up with debt at nearly 300 per cent of national income — to accept the urgency.

Over the coming decades we will spend more on health and pensions. Much more. We will lose £30 billion or so of revenues from fuel duties. We will spend billions on climate change mitigation. No longer will we be able to raid the defence budget to pay for any of this.

In all the chatter in the run-up to October’s budget, about tweaks to taxes here and changes to definitions there, these are the realities. Even if we are on course to meet the present, ultra-loose fiscal target that debt should be falling in five years’ time, our public finances will still not be sustainable without serious cuts to the scope of the welfare state or increases in taxes.

So we will have to make choices. Cutting winter fuel allowance is one tiny choice. Of course, it was ludicrous for a government minister to claim that it was a choice necessary to prevent immediate fiscal armageddon, but it is incumbent on those who don’t like it to say what they would propose instead.

Not extending the scope of the welfare state to insure against the cost of social care is a bigger choice. It’s a choice that our welfare state should not do exactly what it was set up to do, to provide social insurance to protect people from risks that they cannot insure themselves. But it would cost more and, if we are not willing to pay for it, it is time, perhaps, to accept the consequences. If we, to our collective shame, are never going to find the political will to finance social care for some of our most vulnerable citizens, as it seems increasingly obvious that we are not, then it’s much less cruel simply to say so.

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Warren Takunda

Economic

The dollar held onto its sharpest gains in a week on Wednesday after an Iranian missile attack on Israel drove buying of safe assets as investors fretted about the widening of conflict in the Middle East.

Moves in Asia were slight, though most currencies were attempting to regain some ground after sharp falls in the previous session.

The euro eased 0.06% to $1.1060, following its largest drop in nearly four months on Tuesday.

The Australian and New Zealand dollars erased early gains to last trade 0.06% and 0.25% higher, respectively, at $0.6887 and $0.6296.

The kiwi was further pressured by bets of more aggressive easing from the Reserve Bank of New Zealand (RBNZ) when it meets next week, with markets pricing in an 87% chance of a 50-basis-point cut.

Iran said on Wednesday its missile attack on Israel, its biggest military assault on the Jewish state, was over, barring further provocation, while Israel and the United States promised to retaliate against Tehran as fears of a wider war intensified.

Israel said Iran fired more than 180 ballistic missiles and Iran's Revolutionary Guard Corps said the attack was retaliation for Israeli killings of militant leaders and aggression in Lebanon against the Iran-backed armed movement Hezbollah.

Markets' response to the Middle East tensions thus far has largely centered on oil prices and ANZ analysts noted further moves will likely be determined by Israel's response and whether it attacks Iran's military or oil industry.

Elsewhere, the bid for safety kept the Swiss franc steady at 0.8460 per dollar.

Sterling fell 0.11% to $1.3272, while the U.S. dollar rose marginally to 101.27 against a basket of currencies .

The dollar index rose about 0.5% in the previous session, its largest rise since Sept. 25, which was also helped by a stronger-than-expected reading on U.S. job openings.

Westpac strategist Imre Speizer said the Middle East was unpredictable but that in the absence of escalation market sentiment could recover and focus return to economics.

In Japan, the yen was last 0.14% weaker at 143.78 per dollar.

The country's newly appointed economy minister, Ryosei Akazawa, said on Wednesday that Prime Minister Shigeru Ishiba expects the Bank of Japan to make careful economic assessments when raising interest rates again.

Focus now turns to U.S. private payrolls data due later on Wednesday, with traders also keeping a wary eye on a labor dispute at U.S. ports.

East and Gulf Coast dockworkers began their first large-scale strike in nearly 50 years on Tuesday, halting the flow of about half the country's ocean shipping.

In a nationally televised debate on Tuesday, U.S. Senator JD Vance, Republican Donald Trump's pick as his vice presidential running mate, squared off against Minnesota Governor Tim Walz, who Democrat Kamala Harris tapped to be her No. 2, though the event was met with muted market response.

Source: Reuters

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Justin

Economic

Banks that borrowed from a Federal Reserve (Fed) emergency lending facility crafted after the collapse of Silicon Valley Bank might start repaying their loans at a faster pace, draining liquidity from the financial system.

The Bank Term Funding Program, or BTFP, launched in 2023 to support ailing financial institutions and restore confidence by allowing banks and credits unions to borrow money for as long as a year at low costs was a popular programme, surging to an all-time high of US$168 billion (RM696.86 billion) earlier this year. But now that the Fed slashed rates by a half-percentage point the lending, facility is looking less attractive, according to RBC Capital Markets strategist Izaac Brook.

“We might see early repayment of these loans start to ramp up in the coming weeks,” Brook wrote in a note to clients . “If not, these BTFP loans should largely roll off around year-end, given that most were either originated, or rolled over for another year, before the programme was made less attractive in Jan ‘24.”

Financial institutions tapped BTFP to take advantage of loans carrying generous terms: one-year overnight index swap rate plus 10 basis points with no penalty for early repayment, and US Treasuries and agency debt as collateral valued at par.

The facility was so attractive that Fed policymakers increased the cost of borrowing in January because some institutions were taking advantage of it to fund an arbitrage opportunity. As a result, borrowing from the programme shrank.

If loans are largely repaid, liquidity will be removed from money markets. Whether the money will come from the Fed’s overnight reverse repurchase agreement facility or bank reserves will depend on whether banks rely on borrowing from the federal home loan banks or money-market funds pulling cash from the RRP to absorb the increased supply.

Banks of course could turn to other sources like commercial paper or certificates of deposit, or they could just let the loan roll off without seeking alternate financing.

Brook sees borrowing from the FHLB as the most likely path given that many of the banks that tapped the BTFP are smaller and have limited access to funding. He also said it’s unlikely institutions will turn to other Fed facilities like the discount window or standing repo facility unless they were experiencing severe stress.

While repayments are expected to create some funding pressure in the short term, it will have little impact on the central bank’s plan to reduce its bond holdings or unwind its balance sheet.

“These pressures would be transitory and not meaningful enough to threaten an early end to QT,” Brook said, referring to a process known as quantitative tightening. His firm doesn’t expect QT to end until the second half of 2025.

Source: Theedgemarkets

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SAXO

Stocks

Key points

No recession and lower rates will lift the broader market: With a soft landing and lower interest rates, defensive sectors like real estate and utilities are expected to outperform, while opportunities are shifting away from tech-heavy indices towards the broader market. Green transformation stocks, although down this year, may rebound under a low-rate environment in 2025.

What we can learn from past rate cut cycles: Historically, the US equity market performs better after the beginning of a rate cut cycle, with only a few exceptions. Rate cuts should be viewed as a positive opportunity for long-term investors to adjust portfolios for falling rates.

US election outcome and its 2025 impact: A Harris victory with a likely gridlock in Congress could slow fiscal spending but benefit green stocks, emerging markets, and tech. In contrast, a Trump victory might boost European defence stocks while negatively affecting US tech and emerging markets.

No recession and lower rates will lift the broader market

If we look at the global equity market some things have changed in third quarter. There has been a small rotation from cyclical sectors into defensive sectors as some investors took the technology declines in July and volatility hiccup in August as clues that things are about to get worse. The broader US equity market as defined by the equal-weight S&P 500 Index has begun to outperform the S&P 500 Index.

This suggests that opportunities may be shifting away from the Magnificent 7 to the broader market. Lower interest rates and a soft landing scenario would point to an everything rally where the rest of the market begins to outperform. The strongest sectors of late have been real estate and utilities as investors are expecting those two sectors to do well with a backdrop of falling interest rates.If we look across our thematic baskets we still observe the same trends.

Defence remains the best theme this year with the New Biotech and Mega Caps rounding out the top three. Everything related to the green transformation is down for the year and is the contrarian bet going into 2025 as lower interest rates could help green stocks, but it is worth noting the risks to green stocks should Trump win the US election. The defence theme is by far together with the green transformation theme the two themes with highest sensitivity to the US election outcome in November.Our long-term equity views, driven by long-term return expectations, across geography and sectors have not changed much from our previous equity outlook.

The US equity market is still the strongest, but the European equity market is just more compelling because it is cheaper. At a sector level, the energy sector has seen expected returns rise during the third quarter as oil prices have fallen and looks very attractive despite its low growth outlook. Sectors such as health care, financials, and communication services also come with a positive outlook. Despite the comeback in utilities and real estate, those two sectors still have the weakest fundamentals and are the only two sectors that are raising capital from shareholders on a net basis.

Will Lower Rates Lift All Boats in Equities?_1

What we can learn from past Fed rate cut cycles?

The Fed decided at the September FOMC rate decision meeting to cut its policy rate by 50 bps, initiating what is the first rate cut cycle since 2019. The intense debate ahead of the decision was whether the Fed should start its rate cutting cycle cautiously as inflationary pressures are still present and the economy is doing fine, or should front load by cutting quickly to pre-empt the lagged impact on the economy from the high Fed policy rate.

While an important discussion, it matters more for investors whether a Fed rate cut cycle is negative or positive for equities?It is not an exact science to measure and count rate cutting cycles as there are several ways to choose your cycles, ranging from the number of consecutive cuts, the duration of the cycle, the magnitude of cuts etc. We have isolated 20 rate cut cycles by the Fed since 1957 and measured the subsequent 24-month performance in the S&P 500 Index. We find that the US equity market in general (the median path) performs better than the normal historical performance once a Fed rate cut cycle has begun.

There are only three paths that end up with a negative return for investors after 24 months. Two of those were the rate cut cycles that begin in November 2000 and July 2007, respectively. These recent examples might lead many to make wrong assumptions on what a rate cut cycle is all about. For the long-term investor, the rate cut cycle should not be viewed as something negative, but rather an opportunity to see whether the portfolio has the right exposures that can do well when interest rates fall.

Will Lower Rates Lift All Boats in Equities?_2

US election outcome will have a big impact on 2025

The Fed did not manage to slow the economy much in 2023 despite aggressively hiking its policy rate because of the unprecedented fiscal impulse by the Biden administration, one that was unleashed despite the lack of a recession. The fiscal deficit expanded by 4.7% of GDP, equivalent to almost $1trn from July 2022 to July 2023. US politics find itself in a populistic era, regardless of whether Trump or Harris wins.

Only gridlock scenarios (in which either winner does not control both houses of Congress) can prevent fiscal stimulus from continuing at unsustainable levels, whereas a Trump sweep or Harris sweep victory would see a continuation of massive fiscal spending.If Trump wins the election, sweep or gridlock, we expect this outcome to have a large positive effect on European defence companies as a Trump administration would mean less support for Ukraine.

In this scenario, the EU would be forced to accelerate defence spending using its own defence industry, a lift to growth expectations for that sector. A Trump administration regardless of whether the Republicans control both houses in the US Congress will mean higher tariffs and potentially weaken sentiment in the US technology sector that depends on long and connected supply chains in Asia. We also expect a more negative sentiment around emerging markets under a Trump administration due to the risks from tariffs and from a stronger US dollar from tariffs.A Harris victory most likely come with a gridlock scenario where Harris becomes US President but Democrats fail to win the Senate.

This scenario could be negative for economic growth in 2025 as fiscal spending will enter a more difficult period. A Harris victory would likely boost stocks linked to the green transformation. We also believe emerging markets and technology stocks could react positively to a Harris administration, in part in a sigh of relief from avoiding new Trump tariffs.

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SAXO

Commodity

Economic

Key points

♦ Multiple uncertainties, including the US presidential election will continue to underpin demand for investment metals, potentially led by silver, provided emerging signs of stabilising demand for industrial metals in China can be sustained

♦ The energy sector will be watching the US presidential election closely, given the two candidates’ opposing views on traditional versus renewable sources of energy. Having spent a considerable time this year trading in the USD 80’s we now see Brent being stuck in the 70’s for the foreseeable future

♦ We see additional but at this stage not spectacular gains for copper supported by lower funding costs as the US Federal Reserve cuts rates, further reducing the risk of a recession, a stabilising growth outlook in China amid government support and continued demand towards the green transition

In early 2024, we focused on the metal sector as a potential winner for the year and beyond. Following an already strong first half, the precious metal sector, led by gold, continued higher in the third quarter, as investors sought protection in an uncertain world, culminating in September with the start of a supportive US rate-cutting cycle. The energy and industrial metals sectors—two growth-dependent sectors—suffered setbacks amid a deepening slowdown in China and rising recession risks elsewhere, most notably in Europe.

As of now, the Bloomberg Commodity Total Return Index is up around 3.5% for the year, with strong gains in precious metals, soft commodities, and, to a lesser extent, industrial metals being offset by losses across the energy sector, and not least the grains sector, where prices remain subdued following another strong production year. While adverse weather drove large gains in coffee, cocoa, and sugar, the year so far has belonged to metals, especially gold and silver. These two investment metals have seen strong demand from investors.

Commodity Outlook: Gold and Silver Continue to Shine Bright_1

Election impact on commodities

The energy sector will be watching the US presidential election closely, given the two candidates’ opposing views on traditional versus renewable sources of energy. Trump’s pro-energy policies may, over time, add downward pressure on energy prices from higher production and upward pressure on OPEC+ to keep them supported, while a Harris presidency would maintain policies that promote the use of electric vehicles and renewable energy, both of which require large amounts of green transformation metals, from copper and lithium to silver, aluminium, and cobalt.

Overall, the risk of large-scale unfunded government spending—whether it’s infrastructure, renewable energy focus, or social programmes—as well as US-China trade wars or tax cuts may all raise fresh concerns about inflation and rising levels of government debt, leaving the market to speculate that investment metals such as gold may find support no matter the outcome of the election. And in the event the US election results in a gridlocked Congress, even if fiscal spending is restrained, this would raise the risk of a recession, requiring more forceful Fed easing – also gold supportive.

Gold and silver have more upside

As we head towards the final quarter and the November US presidential election, we see multiple uncertainties continuing to underpin demand for investment metals, potentially led by silver, provided emerging signs of stabilising demand for industrial metals in China can be sustained. The reasons investors continue to pay record prices for gold boil down to concerns about global developments from fiscal profligacy, geopolitics, and “de-dollarisation” from central banks, as well as its general safe[1]haven appeal. A supportive rate-cutting cycle from the US Federal Reserve adds to the mix.

Given the prospect of these underlying demand trends not going away anytime soon, we forecast further upside to gold ahead of year-end and into 2025, when the yellow metal has the potential to reach another psychological mark of USD 3,000. Supported by a stabilising industrial metal sector, silver could potentially do even better, not least considering its relative cheapness to gold, which could see it take aim at USD 40 next year. This represents a conservative target of the gold-silver ratio at 75 versus the current level of around 83.

Crude’s sluggish demand outlook forcing a downward range shift

Brent crude oil’s September slump below USD 70 proved to be relatively short-lived. The market concluded that at such low prices, and with hedge funds holding a record short position (belief that prices would continue to fall), lower prices would require a recession to be justified. We estimate the probability of a US recession in 2025 is at only 25%, but with the impact of higher interest rates still uncertain. Despite some economic weaknesses, key indicators such as growth, capital expenditures, and job postings suggest the economy is not in a recession yet.

However, the combination of robust non-OPEC+ production growth and sluggish demand, especially in China, which has seen its 2024 demand growth slow to a few hundred thousand barrels a day from around 1.3 million barrels per day in 2023, is likely to keep the upside capped in the coming months. Some of the supply side focus is on Libya, where prolonged supply disruptions may help tighten the market, and on OPEC+ as we watch for whether they will continue to delay a planned production increase, now set for December. Having spent a considerable time this year trading in the USD 80’s we believe these considerations point to a Brent crude price stuck in 70’s for the foreseeable future, with a geopolitical event or a recovering China the possible drivers of any upside surprise.

Copper demand on the mend following mid-year slump

Copper prices have stabilized following a mid-year slump the came after a brief spike to all-time highs in late May, mostly from speculators looking for higher prices amid rising demand from the energy transition, and on the expected surge in demand for power from AI-related datacenters. The May to August slump was further exacerbated by a continued rise in stocks held at warehouses monitored by the major futures exchanges, most notably in China, which was seen as a sign of sluggish demand, eventually forcing prices lower to levels that by now have started to stimulate demand.

With the demand outlook stabilizing, a troubled supply side has also received some attention following production downgrades in Chile and Peru, two of the world’s top suppliers. Into the final quarter and beyond, we believe the combination of lower funding costs as the US Federal Reserve cuts rates, the avoidance of a recession in the US, a stabilising growth outlook in China amid government support and continued demand towards the green transition, will all help underpin prices, leaving the door open for additional but at this stage not spectacular gains as those we saw in early 2024.

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Cohen

Cryptocurrency

Global banking conglomerate Societe Generale has partnered with Bitpanda, to grow crypto and stablecoins into a key component of the global financial system.

Bitpanda will work with the banking conglomerate’s blockchain subsidiary, Societe Generale-FORGE, to advance the mainstream adoption of its euro-denominated stablecoin EUR CoinVertible (EURCV).

The partnership is a crucial step in making stablecoins a part of the wider financial system, according to Jean-Mark Stenger, CEO of Societe Generale-FORGE.

Stenger told Cointelegraph:

“This partnership is a crucial step towards achieving our vision of making stablecoins a core component of the global financial system. Together with Bitpanda, we are confident in our ability to offer European users a stable, secure, and accessible digital currency."

The partnership comes ahead of the full implementation of the Markets in Crypto-Assets (MiCA) bill, the first comprehensive regulatory framework for the crypto industry. The framework impacting crypto-asset service providers is set to go into full effect on Dec. 30.

Euro-based stablecoins are essential for the European crypto industry

Euro-based stablecoins will be essential for the future of the European crypto industry, according to Lukas Enzersdorfer-Konrad, Deputy CEO of Bitpanda, who wrote:

“The landscape is changing, integration with traditional finance is increasing, and fully regulated stablecoins are the bridge that will make it possible. We will work with Societe Generale-FORGE to bring that future one step closer.”

Stablecoins are the main on-ramp between the world of fiat currencies and digital assets. Investor access to regulated stablecoins is essential for attracting more investment into cryptocurrencies.

Societe Generale’s new stablecoin will be MiCA-compliant and listed on the Bitpanda trading platform for European investors.

Societe Generale is the world’s 19th largest banking group, holding over $1.7 trillion in total assets as of 2023, according to Wikipedia data.

MiCA regulations are just around the corner

Increasingly, more crypto firms are preparing for the full implementation of the MiCA bill, including Kraken exchange, which acquired the Netherlands’ oldest registered crypto broker firm, Coin Meester (BCM), as part of its European expansion.

The upcoming MiCA bill will make the European Union the first jurisdiction with a holistic regulatory framework on digital assets, which could be a pivotal moment for crypto regulation according to compliance experts.

While MiCA’s full implementation is set for December 2024, it could suffer potential delays due to the technical complexity of the implementation, according to Hedi Navazan, head of compliance and regulatory affairs at Crystal Intelligence.

Navazan told Cointelegraph:

“Technological complexity, cross-border jurisdictional nature of crypto assets complicates regulatory enforcement and necessitates strong international cooperation and information-sharing mechanisms.”

Crystal Intelligence has co-hosted seven roundtable discussions on the upcoming MiCA bill with public and private participants and notable crypto firms, including Binance, Bitpanda, Kraken and members of the European Commission.