Stablecoins Could Trigger Major Economic Shocks in Europe: Expert

The European Central Bank may soon need to deal with stablecoins to not act as a catalyst for macroeconomic turmoil, according to Dutch central bank governor Olaf Sleijpen. During a recent interview, Sleijpen cautioned that the quick rise of dollar-pegged stablecoins could make them systemically important to Europe’s financial system.

If stablecoins are not that stable, users could end up in a situation where the underlying assets need to be sold quickly, he said. He further added that mass liquidations could spread across markets, tightening liquidity and putting pressure on inflation and broader economic stability. 

Should such a shock materialize, Sleijpen said the ECB may have to reconsider its monetary strategy. But, he stressed it’s unclear whether the response would require increasing or decreasing interest rates.

Explosive Stablecoins Growth Raises Systemic Risk

The warnings come amid a dramatic surge in stablecoin adoption. Notably, the total market value of stablecoins has climbed nearly 50% this year and reached past $310 billion. 

Tether’s USDt expanded from $127 billion in November 2024 to $183 billion, while USDC nearly doubled from $37 billion to $74 billion over the same period.

Notably, data by LookOnChain suggests that since the October 11 crash, Circle and Tether have combinedly minted $14 billion in stablecoins. This suggests continuous fund inflow despite ongoing crypto market correction.

The U.S. Treasury predicted in April that if current conditions persist, the stablecoin market could reach $2 trillion by 2028. Sleijpen noted that if such growth continues, fluctuations in dollar-backed tokens could directly influence Europe’s inflation and financial stability outlook.

Growing Warnings Across Europe

European officials have become increasingly vocal about the risks. In April, ECB board member Piero Cipollone argued that launching a digital euro would help hold monetary sovereignty and prevent foreign stablecoins to become payment tools in the region. 

Meanwhile, Italian finance minister Giancarlo Giorgetti warned that U.S. dollar stablecoins pose a bigger threat to European economic stability than trade tariffs.

The concern extends beyond currency dominance. If major stablecoin issuers were forced to unwind their holdings quickly, the selloff could spill into global bond and money markets. 

Nobel Prize-winning economist Jean Tirole warned in September that such a collapse could force governments into costly bailouts. This is similar to systemic banking failures, as seen during the 2008 financial crisis.