A new warning from the Dutch central bank governor has revived debate inside Europe’s policy circles. The concern is growing quickly. Dollar-backed stablecoins now form a financial channel that reaches deep into the Eurozone’s economy. Their scale introduces a new kind of pressure on the European Central Bank. The dynamic resembles older eurodollar forces that once constrained global central banks.
Olaf Sleijpen explained this risk in a detailed interview. He said stablecoins linked to U.S. assets could influence European conditions. The issue is no longer just about crypto markets. It now touches monetary sovereignty. His message highlighted a structural shift that many officials have avoided discussing openly.
Growing Link Between U.S. Liquidity and Europe’s Economy
Sleijpen said stablecoins have expanded at a rapid pace. He pointed to their sharp rise this year. Trading volumes grew by 48%, reaching more than $300 billion. The increase followed new U.S. rules that allowed private issuers to expand their operations. Many of these tokens hold U.S. Treasuries as backing. This creates a tight link between American interest-rate cycles and European financial activity.
He warned that instability in these assets could push the ECB into a difficult position. A sudden run would force issuers to sell U.S. bonds. That liquidation could push stress through markets that influence Europe. It could also impact inflation, credit, and liquidity. He said the ECB might need to adjust interest rates in response. However, he did not specify the direction. He said financial stability tools should remain the first line of defense.
His concern reflects a broader shift inside the institution. Some officials now compare this trend to conditions seen in emerging economies. In those regions, heavy dollar use weakens control over interest rates. Sleijpen said Europe could face a similar challenge if the flow of capital into stablecoins continues. He emphasized the need for vigilance.
ECB Weighs New Risks as Policy Outlook Remains Uncertain
This concern arises during a moment of relative calm for the ECB. Sleijpen said conditions improved slightly since early summer. Trade uncertainty eased, and the Eurozone economy held up better than expected. Inflation also moved close to the ECB’s target. He said this combination offered no strong case for a rate move. Investors now expect only a small chance of another cut next year. Current borrowing costs remain unchanged after eight earlier reductions.
However, Sleijpen said inflation risks still require careful monitoring. He said the outlook shows below-target inflation for several quarters. Yet he argued that energy prices and currency strength explain much of this trend. He also said households’ inflation expectations stayed stable. He added that such expectations remain central for policy decisions.
He noted the need for constant review as global conditions shift. The experience of 2022 shaped that view. Inflation rose far faster than expected when Russia invaded Ukraine. He said that episode proved how quickly shocks can spread across the economy. He also said it showed why policymakers must question early assumptions.
Sleijpen also acknowledged political changes around him. He replaced Klaas Knot in July as governor of the Dutch central bank. Despite the leadership transition, Sleijpen said the ECB will continue to assess each meeting independently. He said decisions must rely on incoming data.
The new concern is different from past debates. Stablecoins have grown into cross-border liquidity engines. Their link to U.S. assets gives them influence beyond crypto markets. Their reach can alter European conditions before policymakers respond. Sleijpen said this evolution demands closer scrutiny. He said it also challenges the ECB to protect its independence at a time of rapid monetary change.