ECB Warns $300B Stablecoin Market Could Trigger Global Financial Crisis

A possible run on stablecoins might drive the European Central Bank to rethink its financial coverage strategy, based on Dutch central financial institution governor Olaf Sleijpen, who warned that dollar-pegged digital tokens are quickly approaching systemic relevance.

The $300 billion stablecoin market, which has surged over 48% this yr following new U.S. laws below President Trump, now poses direct dangers to European monetary stability, financial progress, and inflation management that will require ECB intervention.

“If stablecoins within the US improve on the similar tempo as they’ve been rising, they’ll develop into systemically related at a sure level,” Sleijpen told the Financial Times, noting that instability in these tokens might set off mass sell-offs of underlying property, primarily U.S. Treasuries.

While the central financial institution would seemingly deploy monetary stability instruments first, he acknowledged uncertainty over whether or not charge cuts or will increase would observe, stating, “I don’t know through which route we’d be going.“

ECB Warns $300B Stablecoin Market Could Trigger Global Financial Crisis — Dutch central financial institution governor Olaf Sleijpen. | Source: Bloomberg

Dollar-Backed Tokens Threaten European Monetary Sovereignty

The explosive progress of dollar-denominated stablecoins has sparked alarm amongst European establishments, with officers warning that the bloc faces circumstances just like these in rising markets, the place widespread international foreign money use undermines home financial coverage.

A senior ECB official warned this summer time that greenback stablecoin dominance might hamper European policymakers’ means to set rates of interest or management cash provide, whereas Nobel Prize-winning economist Jean Tirole cautioned that token failures might drive governments into multibillion-dollar bailouts.

These considerations intensified after the U.S. enacted the GENIUS Act in July, establishing federal oversight for stablecoin issuers and spurring fast market growth.

DefiLama information reveals euro-pegged stablecoins stay marginal at below $549 million in circulation, representing simply 0.18% of the worldwide market in comparison with greenback tokens’ 99.58% dominance.

The European Systemic Risk Board, chaired by ECB President Christine Lagarde, escalated warnings in October by figuring out “built-in vulnerabilities” in multi-issuer stablecoin fashions.

During its 59th General Board assembly, the ESRB endorsed a advice to ban buildings the place EU-regulated issuers maintain native reserves whereas non-EU companions handle an identical tokens backed overseas.

They warned that stress-driven redemptions might overwhelm European reserves and expose the bloc to offshore liabilities.

European Banking Consortium Launches Counter-Strategy

Despite their considerations about stablecoins, nine major European lenders responded by forming a consortium to launch a euro-backed stablecoin within the second half of 2026, focusing on MiCA licensing below the Netherlands’ regulatory framework.

ING, UniCredit, CaixaBank, Danske Bank, SEB, Raiffeisen Bank International, Banca Sella, KBC, and DekaBank established a joint firm to deal with the challenge, aiming to create a European different to U.S.-dominated markets.

“We imagine this growth requires an industry-wide strategy, and it’s crucial that banks undertake the identical requirements,” stated Floris Lugt, Digital Assets lead at ING.

The consortium’s stablecoin guarantees near-instant transactions at decrease prices, together with round the clock cross-border settlement capabilities.

European Stability Mechanism Managing Director Pierre Gramegna reinforced this push during an October hearing, stating, “Europe shouldn’t be depending on U.S. dollar-denominated stablecoins, that are at the moment dominating markets.”

Eurogroup President Paschal Donohoe supported this stance, noting that the ECB’s digital euro challenge, anticipated to be launched by 2029, might additional modernize regional funds.

Momentum behind the digital euro continues to construct, with ECB Executive Board member Piero Cipollone describing current consensus amongst finance ministers on buyer holding limits as a “main breakthrough.”

The European Parliament is predicted to ascertain a legislative framework place by May 2026, whereas member states intention for normal settlement by year-end.

The initiative seeks to scale back reliance on Visa and PayPal whereas limiting dollar-stablecoin affect.

Despite Europe’s regulatory preparations, the European Commission now proposes shifting MiCA supervision from nationwide authorities to the European Securities and Markets Authority, doubtlessly disrupting the framework simply as full implementation approaches subsequent yr.

Industry teams warn that this reopening dangers introducing authorized uncertainty, although French officers argue that centralized oversight would shut regulatory loopholes inherent within the present passporting system.

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