LONDON, July 11 (Reuters) - European fund giant DWS

has created a new company as part of its plans to

launch the first German-regulated cryptocurrency next year, the

firm's CEO told Reuters, as major financial companies jostle to

launch new digital tokens.

Deutsche Bank-owned DWS, which manages 941 billion euros ($1

trillion) globally, plans to go live with the first

euro-denominated stablecoin to be regulated by Germany's BaFin

watchdog in 2025, Stefan Hoops said. BaFin declined to comment.

DWS had previously said the token would be launched by June

next year. It declined to comment on whether the process was

delayed.

Stablecoins are digital tokens designed to keep a constant

value and are backed by traditional currencies such as the U.S.

dollar or euro. BaFin has yet to award an e-money licence for a

stablecoin, and DWS has set its sights on being first.

The company behind the token - AllUnity, a partnership

between DWS and specialist firms Flow Traders and Galaxy - was

incorporated in Frankfurt in June.

Despite more firms showing interest in digital tokens,

critics say their use cases remain unclear and untested, but

Hoops said that DWS anticipated interest from different types of

clients.

"In the short term, we expect demand from investors in

digital assets, but by the medium term we expect wider demand,

for instance from industrial companies working with 'internet of

things' continuous payments," Hoops said.

Several major financial institutions, including PayPal ( PYPL )

and Societe Generale, have tried issuing

stablecoins, but the market remains dominated by one upstart

issuer, Tether.

Tether has $112 billion of its token in circulation, making

up the bulk of the $162 billion stablecoin market, according to

CoinGecko data.

As rates have risen, Tether says it has generated billions

of dollars worth of profits on its reserves, which include

Treasuries, bitcoin and secured loans.

Stablecoin issuers create, or "mint", the tokens and hold

the underlying fiat currency in reserves, which they can then

invest for yield.

Regulators have expressed concerns that growing stablecoin

reserves expose the broader financial system to bigger risks,

because they act as a bridge between the crypto universe and

mainstream financial markets.

BaFin has generally been critical of cryptocurrencies and

has previously called for global regulation of the industry, but

it has said it views stablecoins differently. European Union

rules requiring stablecoins to be regulated kicked in last

month.

Euro-pegged stablecoins have seen limited uptake so far

compared to their dollar-linked peers.

($1 = 0.9242 euros)