Potential Stablecoin Crisis Could Challenge ECB Policies, Warns Dutch Central Bank Governor

The Dutch central bank governor, Olaf Sleijpen, has raised alarms about the growing influence of stablecoins on the European Central Bank’s (ECB) policies. He highlights potential risks posed by dollar-pegged stablecoins, suggesting they could lead to significant economic disruptions. These insights emerge amidst an expanding stablecoin market, which has nearly doubled in value this year and is projected to reach $2 trillion by 2028.

Key Takeaways

Dutch central bank governor Olaf Sleijpen warns that stablecoins could become critical to financial stability in Europe.
If dollar-pegged stablecoins destabilize, they could lead to significant market stress, impacting inflation and the economy.
The stablecoin market has experienced rapid growth, now valued at approximately $310 billion.
ECB may have to reconsider monetary policy if stablecoins pose major economic risks.
Concerns exist that large stablecoin issuers could exacerbate financial instability by rapidly liquidating assets.

Stablecoin panic could upend ECB policy, Dutch central bank governor warns

Stablecoins: A Growing Economic Concern

According to Dutch central bank governor Olaf Sleijpen, the European Central Bank (ECB) is facing a critical need to assess stablecoins not only as regulatory issues but also as potential instigators of macroeconomic challenges. In an interview with the Financial Times, Sleijpen cautioned that the rapidly growing dollar-pegged stablecoins could become integral to Europe’s financial landscape. He noted that any destabilization of these tokens might jeopardize financial stability, impact the economy broadly, and even influence inflation rates.

“If stablecoins are not genuinely stable, it could lead to a situation where underlying assets must be liquidated swiftly,” Sleijpen pointed out, emphasizing that such rapid sales could escalate market pressures significantly. He mentioned that the ECB may need to "rethink monetary policy" if these shocks are severe enough. However, he acknowledged that it remains uncertain whether this would necessitate interest rate increases or cuts.

Stablecoin market growth from 2020 to 2025. Source: RWA.xyz

Growth of Stablecoins

Sleijpen’s remarks come at a time when the stablecoin sector is witnessing explosive growth. Current data from CoinGecko reveals that the stablecoin market cap has surged by almost 50% this year, with stablecoins now valued at approximately $310 billion. For context, Tether's USDt, the leading US dollar-pegged stablecoin, has increased its market cap from $127 billion in November 2024 to $183 billion today, representing a 44% rise. Similarly, the second largest stablecoin, USDC, has nearly doubled in value from $37 billion to $74 billion.

In April, the US Department of the Treasury indicated that changing market conditions could further propel the growth of stablecoins, projecting that their market cap could reach $2 trillion by 2028. Sleijpen remarked that as these dollar-pegged stablecoins expand, their valuation shifts could have direct repercussions on Europe’s economic projections.

Concerns Regarding Dollar-Backed Stablecoins in Europe

In an April article, ECB Executive Board member Piero Cipollone highlighted his apprehensions about the rise of dollar-backed stablecoins. He suggested that developing a central bank digital currency (CBDC) might help maintain monetary sovereignty within the eurozone, positing that a digital euro could inhibit the proliferation of foreign currency stablecoins as a preferred means of exchange in Europe.

Additionally, Italy's Minister of Economy and Finance, Giancarlo Giorgetti, raised concerns about the risks posed by US dollar stablecoins. He expressed the belief that these stablecoins could jeopardize European financial stability beyond the threats presented by trade tariffs.

While apprehensions about stablecoins are clear, Sleijpen's statements reveal a potentially more pressing issue: that major stablecoin issuers could act as conduits for financial instability. A large-scale liquidation of reserves by major issuers could lead to a cascade of effects, including liquidity issues, fluctuations in asset prices, and inflationary pressures. Notably, in September, Nobel Prize-winning economist Jean Tirole warned that governments might face billions in bailout costs if significant stablecoins were to collapse.