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

A imaginable tally connected stablecoins could unit the European Central Bank to reconsider its monetary argumentation approach, according to Dutch cardinal slope politician Olaf Sleijpen, who warned that dollar-pegged integer tokens are rapidly approaching systemic relevance.

The $300 cardinal stablecoin market, which has surged implicit 48% this twelvemonth pursuing caller U.S. regulations nether President Trump, present poses nonstop risks to European fiscal stability, economical growth, and ostentation power that whitethorn necessitate ECB intervention.

“If stablecoins successful the US summation astatine the aforesaid gait arsenic they person been increasing, they volition go systemically applicable astatine a definite point,” Sleijpen told the Financial Times, noting that instability successful these tokens could trigger wide sell-offs of underlying assets, chiefly U.S. Treasuries.

While the cardinal slope would apt deploy fiscal stableness tools first, helium acknowledged uncertainty implicit whether complaint cuts oregon increases would follow, stating, “I don’t cognize successful which absorption we would beryllium going.“

Dutch cardinal slope politician Olaf Sleijpen. | Source: Bloomberg

The explosive maturation of dollar-denominated stablecoins has sparked alarm among European institutions, with officials informing that the bloc faces conditions akin to those successful emerging markets, wherever wide overseas currency usage undermines home monetary policy.

A elder ECB authoritative warned this summertime that dollar stablecoin dominance could hamper European policymakers’ quality to acceptable involvement rates oregon power wealth supply, portion Nobel Prize-winning economist Jean Tirole cautioned that token failures could unit governments into multibillion-dollar bailouts.

These concerns intensified aft the U.S. enacted the GENIUS Act successful July, establishing national oversight for stablecoin issuers and spurring accelerated marketplace expansion.

DefiLama information shows euro-pegged stablecoins stay marginal astatine nether $549 cardinal successful circulation, representing conscionable 0.18% of the planetary marketplace compared to dollar tokens’ 99.58% dominance.

Source: DefiLama

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

During its 59th General Board meeting, the ESRB endorsed a proposal to prohibition structures wherever EU-regulated issuers clasp section reserves portion non-EU partners negociate identical tokens backed abroad.

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