The European Central Bank (ECB) has warned that while stablecoins currently pose limited risks to eurozone financial stability, their rapid growth demands close monitoring.
Stablecoins are cryptocurrencies pegged to traditional currencies, offering low-cost, instant, and secure global payments.
Despite their potential, they remain "rarely used for real transactions" and have not yet triggered significant withdrawals from bank deposits, according to the ECB.
However, the ECB cautions that their rapid expansion and adoption in new use cases could create financial stability risks. If widely adopted, households might shift part of their bank deposits towards stablecoins, the report suggests.
This shift could undermine a key funding source for banks and leave them more reliant on volatile resources, the ECB adds.
Recent regulations, such as the EU’s “MiCAR” framework and the US-led “Genius Act,” have fuelled demand for stablecoins, whose market capitalisation now exceeds $280 billion—around 8% of the total crypto market.
The ECB highlights another risk tied to divergent regulations. If stablecoins were issued both within and outside the EU, European reserves might prove insufficient to cover redemption demands, heightening the risk of market panic.
The ECB authors argue that additional safeguards are necessary before stablecoins gain access to the European market.
