Stablecoins could pose a risk to financial stability and inflation in Europe, which could force the European Central Bank to reconsider its monetary policy, according to Dutch central bank Governor Olaf Sleijpen.
Summary
- Olaf Sleijpen of the ECB warns that stablecoins could disrupt financial stability and inflation control in Europe.
- Sleijpen said the ECB may have to take action, but was unsure whether that would require an interest rate increase or a cut.
During a recent interview with the Financial Times, Sleijpen drew attention to the rapid pace at which stablecoin issuance is growing in the United States, especially since President Donald Trump signed the GENIUS Act earlier this year, which paved the way for the issuance of dollar-backed digital tokens by the private sector.
“If stablecoins in the US increase at the same rate they have increased… they will become systemically important at some point,” Sleijpen said.
Since the GENIUS Act, the volume of dollar-pegged digital tokens has increased by more than 48%, topping $300 billion. US dollar-denominated stablecoins such as USDT and USDC are also increasingly used for cross-border payments and trading activities, and have the largest market share globally. The two largest stablecoins by market capitalization, Tether (USDT) and USD Coin (USDC), are both pegged to the US dollar and dominate the stablecoin sector.
Many of these assets are backed by US government bonds, making them particularly susceptible to rapid sell-offs during times of economic stress.
“If stablecoins are not that stable, you could end up in a situation where the underlying assets have to be sold quickly,” Sleijpen continued, adding that this could cause market disruptions severe enough for the ECB to “probably have to reconsider monetary policy.”
He advocated the use of financial stability tools as a first line of defense and acknowledged the uncertainty about how the ECB might respond. He noted that it is unclear whether the situation would require a rate cut or a rate increase.
“I don’t know which direction we would go,” he said.
Sleijpen, one of 26 members of the ECB’s decision-making body, echoes concerns raised time and time again by central bank officials as the stablecoin market grows at a pace few policymakers expected.
Earlier this year, ECB advisor Jürgen Schaaf warned that the rapid rise of dollar-pegged stablecoins structurally threatens Europe’s monetary sovereignty and financial stability, and called for a strategic response to prevent the euro from losing ground to privately issued dollar-based tokens.
Schaaf was particularly concerned about the rise of interest-bearing stablecoins and the risk they pose to traditional banking models in deposit-driven economies such as the eurozone.
“If interest-bearing stablecoins were to become commonplace… they could divert deposits from traditional banks, which could jeopardize financial intermediation and hamper the availability of credit,” Schaaf wrote at the time.
Instead of stablecoins, the ECB has pushed for a digital euro, which it sees as a sovereign and risk-free alternative that could anchor the European payment system. Last month, the central bank moved a step closer to that goal when it selected a group of third-party providers to support key parts of the project, ranging from fraud and risk management to app development and the secure exchange of payment information.
