Key Insights
- •The ECB is increasingly concerned that fast-growing dollar-backed stablecoins could trigger macroeconomic shocks and force a rethink of monetary policy.
- •Explosive stablecoin expansion, with market cap up nearly 50% this year, is raising fears that large issuers could destabilize markets if they rapidly liquidate reserves.
- •European officials warn that reliance on dollar-pegged tokens could threaten monetary sovereignty, financial stability, and potentially require government intervention if major stablecoins falter.
European regulators are growing increasingly alarmed by the surging stablecoin market. Dutch central bank chief Olaf Sleijpen told the Financial Times that a sudden “run on stablecoins” could “send shockwaves” through the economy and force the ECB to adjust its policy.
In recent months, the supply of dollar-backed stablecoins has jumped roughly 50%, to about $310 billion in circulation.
Policymakers warn that this rapid expansion could undermine monetary sovereignty and inflation control. Sleijpen noted that, if stablecoins were to prove unstable, quick asset sell-offs might trigger “market disruptions serious enough for the ECB to probably have to rethink monetary policy.”
Stablecoins’ Rapid Growth and Why It Matters
The stablecoin market has grown explosively, driven by leading tokens like Tether (USDT) and Circle’s USDC. CoinGecko data show the sector’s market cap has nearly doubled since late 2024, and U.S. forecasts suggest it could reach $2 trillion by 2028.
Such figures far exceed analysts’ expectations from just a year ago. This blistering growth has put Europe on alert: many of these tokens are backed by short-term Treasuries, meaning a fast liquidation could ripple through global money markets.
ECB officials have responded by publicly highlighting risks to financial stability. Sleijpen — one of 26 ECB governing council members — warned in his interview that he was “unsure” whether a crypto shock would call for a rate cut or a hike, underscoring the uncertainty of the challenge.
He stressed that stablecoins “could become systemically relevant at a certain point” if issuance keeps rising. Other ECB voices echo this concern.
Board adviser Jürgen Schaaf has cautioned that yield-bearing stablecoins could divert deposits from banks and “jeopardise financial intermediation”.
Schaaf has also warned that unchecked growth of dollar-pegged tokens threatens Europe’s monetary sovereignty and requires a strategic policy response.
ECB Response and the Digital Euro
Alongside warnings, the ECB is doubling down on its own digital currency project. Last month, it took steps toward a digital euro, describing the CBDC as a “sovereign and risk‑free” alternative to private stablecoins.
The bank has selected outside providers to develop key infrastructure for the digital euro, from fraud monitoring to app development.
These moves reflect long‑standing ECB concerns: board member Piero Cipollone has argued that Europe must bolster its own electronic money to keep the euro anchoring payments.
Italy’s finance minister Giancarlo Giorgetti made headlines by saying stablecoins pose an even bigger threat to European stability than trade disputes.
Nobel economist Jean Tirole also warned this week that a major stablecoin collapse could force taxpayers to bear rescue costs.
Europe has begun to codify controls as well. The bloc’s pending MiCA regulations (Markets in Crypto Assets) will impose reserve and governance rules on “asset-referenced tokens” – a category that includes many stablecoins.
But officials signal that these baseline rules may not suffice if the market keeps ballooning. As the Dutch governor put it: “If stablecoins are not that stable, you could end up in a situation where the underlying assets need to be sold quickly,” requiring the ECB to “rethink monetary policy.”
The fast‑growing crypto tokens are no longer seen as a niche issue. The ECB and EU policymakers are preparing for a world in which stablecoins are mainstream – and potentially pose system‑wide risks.
That prospect explains why Europe is racing to tighten oversight and promote its own digital currency: to ensure private stablecoins do not displace the euro or upend the financial system.