LONDON - 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 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)

(Reporting by Iain Withers and Elizabeth Howcroft; Additional reporting by Tom Sims in Frankfurt; Editing by Mark Potter)