European officials are escalating warnings that the rapidly expanding $300 billion stablecoin sector, dominated almost entirely by U.S. dollar-pegged tokens, may soon pose threats not only to financial stability, but also to the European Central Bank’s ability to steer monetary policy.
Dutch central bank governor Olaf Sleijpen said the ECB may eventually be forced to respond to shocks originating from large stablecoin issuers, especially if their reserves must be liquidated during market stress. Speaking to the Financial Times, he cautioned that stablecoins are growing quickly enough to become a macroeconomic variable in their own right.
“If stablecoins are not that stable, you could end up in a situation where the underlying assets need to be sold quickly,” Sleijpen said. Such rapid liquidation (largely of U.S. Treasuries) could “amplify stress across markets,” he warned, adding that a severe shock could compel the ECB to “rethink monetary policy.”
“I don’t know in which direction we would be going,” he admitted.
Dollar Stablecoins Surge Under New U.S. Rules
The stablecoin market has expanded nearly 50% this year, lifted in part by new federal oversight introduced in the United States. Tether and Circle, the issuers of USDT and USDC, continue to dominate global supply. Tether alone has grown from roughly $127 billion in late 2024 to over $180 billion, while USDC has nearly doubled.
The IMF and U.S. Treasury have both forecast that stablecoins could reach a $2 trillion market cap by 2028, far outpacing the growth of euro-pegged alternatives, which remain below $600 million and represent barely 0.2% of global circulation.
This imbalance has sharpened concerns in Europe that widespread use of dollar-backed tokens could undermine the region’s monetary sovereignty. ECB officials have compared the trend to dollarization pressures typically seen in emerging markets, where foreign currency adoption weakens domestic policy tools.
Systemic Risk Concerns Intensify
Regulators across the eurozone are increasingly focused on how a stablecoin run might ripple through global markets. The European Systemic Risk Board in October flagged “built-in vulnerabilities” in multi-issuer structures, warning that cross-border reserve arrangements could expose Europe to offshore liabilities during a redemption wave.
Nobel Prize-winning economist Jean Tirole has also argued that governments could face multibillion-dollar bailout pressure if major tokens were to unwind abruptly, an outcome he says remains insufficiently addressed by current rules.
Europe Rallies Around a Domestic Alternative
In response to the dominance of dollar stablecoins, a group of nine major European banks, including ING, UniCredit, CaixaBank, KBC, and Danske Bank, have formed a consortium to launch a fully regulated euro-backed stablecoin by 2026. The initiative aims to meet MiCA compliance and create a homegrown settlement asset capable of 24/7, low-cost transfers across the bloc.
“We believe this development requires an industry-wide approach, and it’s imperative that banks adopt the same standards,” said Floris Lugt, digital assets lead at ING.
Policymakers see the project as a crucial stepping stone toward the digital euro, now expected around 2029. ECB Executive Board member Piero Cipollone recently described ministerial consensus on digital euro holding limits as a “major breakthrough,” arguing that a central bank digital currency could limit the spread of foreign stablecoins in everyday payments.
Regulatory Debate Looms Over MiCA
Just as Europe prepares to implement its landmark Markets in Crypto-Assets (MiCA) framework next year, the European Commission has proposed shifting supervisory authority from national regulators to the European Securities and Markets Authority. Industry groups warn the last-minute rewrite could complicate licensing, while French officials say centralized oversight would close loopholes in the current passporting system.
Despite those tensions, Europe’s top monetary officials remain aligned on one message: stablecoins have moved beyond niche crypto markets, and their next phase of growth will determine how central banks respond.
As Sleijpen put it, if dollar-pegged tokens continue expanding at their current pace, “they will become systemically relevant at a certain point,” a reality that may force the ECB to adjust faster than it had planned.
