Europe’s central bankers are sounding the alarm over the fast-growing stablecoin market. Dutch central bank governor Olaf Sleijpen says dollar-pegged tokens are expanding so quickly that they could soon affect the European Central Bank’s ability to control inflation and safeguard financial stability.
The stablecoin market is now worth about $300 billion and has grown more than 48 percent this year after the US introduced new federal rules for issuers.
Sleijpen told the Financial Times that a major sell-off or redemption wave could force issuers to dump large amounts of US Treasuries, creating wider market stress. If that happens, the ECB might have to adjust monetary policy, though Sleijpen admitted it is unclear whether rates would need to rise or fall.
European officials warn that the dominance of dollar stablecoins risks weakening the euro’s influence in the region’s economy, similar to challenges seen in emerging markets. Dollar-backed tokens make up roughly 99 percent of global stablecoin supply, while euro-pegged versions remain far smaller.
To counter this imbalance, nine major European banks plan to launch a euro-backed stablecoin in late 2026, aiming for faster, cheaper payments. The initiative will operate under the EU’s MiCA regulatory framework, which may soon move under the European Securities and Markets Authority.
The push aligns with Europe’s digital euro project, expected around 2029.
Image Credit: Pixabay
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