Catenaa, Saturday, November, 22, 2025- The European Central Bank warned that the $300 billion stablecoin market, dominated by dollar-backed tokens, could trigger financial instability in Europe and force a reassessment of monetary policy.
Dutch central bank governor Olaf Sleijpen said rapid growth in US stablecoins has brought them close to systemic relevance, raising risks for economic growth, inflation control, and reserve management.
Officials said a run on stablecoins could lead to mass sell-offs of underlying assets, including US Treasuries, while limiting the ECB’s ability to manage interest rates and money supply.
Euro-pegged stablecoins remain negligible at under $549 million, or just 0.18% of the global market, compared with dollar tokens’ 99.58% dominance.
The European Systemic Risk Board flagged vulnerabilities in multi-issuer stablecoin models, recommending restrictions on structures where EU-regulated issuers hold local reserves while non-EU partners manage identical tokens abroad.
Stress-driven redemptions could overwhelm European reserves and expose the bloc to offshore liabilities, the board said.
In response, nine major European banks, including ING, UniCredit, CaixaBank, and SEB, formed a consortium to develop a euro-backed stablecoin, aiming for MiCA licensing in 2026.
The project intends to provide instant, low-cost, cross-border transactions and reduce dependence on dollar-denominated stablecoins.
The ECB’s digital euro, scheduled for launch by 2029, is expected to further strengthen Europe’s digital payment infrastructure.
European regulators continue refining oversight, with proposals to shift MiCA supervision to the European Securities and Markets Authority, a move intended to close regulatory gaps but raising concerns about legal uncertainty.
The warnings underline the growing tension between US-dominated stablecoins and Europe’s efforts to secure financial sovereignty and digital payment stability.
