A potential run on stablecoins could force the European Central Bank to reconsider its monetary policy approach, according to Dutch central bank governor Olaf Sleijpen, who warned that dollar-pegged digital tokens are rapidly approaching systemic relevance.
The $300 billion stablecoin market, which has surged over 48% this year following new U.S. regulations under President Trump, now poses direct risks to European financial stability, economic growth, and inflation control that may require ECB intervention.
“If stablecoins in the US increase at the same pace as they have been increasing, they will become systemically relevant at a certain point,” Sleijpen told the Financial Times, noting that instability in these tokens could trigger mass sell-offs of underlying assets, primarily U.S. Treasuries.
While the central bank would likely deploy financial stability tools first, he acknowledged uncertainty over whether rate cuts or increases would follow, stating, “I don’t know in which direction we would be going.“
Dutch central bank governor Olaf Sleijpen. | Source: BloombergDollar-Backed Tokens Threaten European Monetary Sovereignty
The explosive growth of dollar-denominated stablecoins has sparked alarm among European institutions, with officials warning that the bloc faces conditions similar to those in emerging markets, where widespread foreign currency use undermines domestic monetary policy.
A senior ECB official warned this summer that dollar stablecoin dominance could hamper European policymakers’ ability to set interest rates or control money supply, while Nobel Prize-winning economist Jean Tirole cautioned that token failures could force governments into multibillion-dollar bailouts.
These concerns intensified after the U.S. enacted the GENIUS Act in July, establishing federal oversight for stablecoin issuers and spurring rapid market expansion.
DefiLama data shows euro-pegged stablecoins remain marginal at under $549 million in circulation, representing just 0.18% of the global market compared to dollar tokens’ 99.58% dominance.
Source: DefiLamaThe European Systemic Risk Board, chaired by ECB President Christine Lagarde, escalated warnings in October by identifying “built-in vulnerabilities” in multi-issuer stablecoin models.
During its 59th General Board meeting, the ESRB endorsed a recommendation to ban structures where EU-regulated issuers hold local reserves while non-EU partners manage identical tokens backed abroad.
They warned that stress-driven redemptions could overwhelm European reserves and expose the bloc to offshore liabilities.
European Banking Consortium Launches Counter-Strategy
Despite their concerns about stablecoins, nine major European lenders responded by forming a consortium to launch a euro-backed stablecoin in the second half of 2026, targeting MiCA licensing under the Netherlands’ regulatory framework.
ING, UniCredit, CaixaBank, Danske Bank, SEB, Raiffeisen Bank International, Banca Sella, KBC, and DekaBank established a joint company to house the project, aiming to create a European alternative to U.S.-dominated markets.
“We believe this development requires an industry-wide approach, and it’s imperative that banks adopt the same standards,” said Floris Lugt, Digital Assets lead at ING.
The consortium’s stablecoin promises near-instant transactions at lower costs, along with round-the-clock cross-border settlement capabilities.
European Stability Mechanism Managing Director Pierre Gramegna reinforced this push during an October hearing, stating, “Europe should not be dependent on U.S. dollar-denominated stablecoins, which are currently dominating markets.”
Eurogroup President Paschal Donohoe supported this stance, noting that the ECB’s digital euro project, expected to be launched by 2029, could further modernize regional payments.
Momentum behind the digital euro continues to build, with ECB Executive Board member Piero Cipollone describing recent consensus among finance ministers on customer holding limits as a “major breakthrough.”
The European Parliament is expected to establish a legislative framework position by May 2026, while member states aim for general agreement by year-end.
The initiative seeks to reduce reliance on Visa and PayPal while limiting dollar-stablecoin influence.
Despite Europe’s regulatory preparations, the European Commission now proposes shifting MiCA supervision from national authorities to the European Securities and Markets Authority, potentially disrupting the framework just as full implementation approaches next year.
Industry groups warn that this reopening risks introducing legal uncertainty, though French officials argue that centralized oversight would close regulatory loopholes inherent in the current passporting system.
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