ECB warns stablecoins threaten eurozone’s monetary control, urging urgent regulation, euro-backed alternatives, and digital innovation to maintain sovereignty.
Stablecoins are rapidly emerging as a significant force in global finance. According to a new blog post by Jürgen Schaaf, advisor to the European Central Bank (ECB), they now pose a strategic threat to the euro. In his article, titled “From Hype to Hazard: What Stablecoins Mean for Europe,” Schaaf cautions that unless a strong reaction is taken, Europe will lose its monetary sovereignty and financial stability.
Stablecoins Threaten Bank Deposits and Lending Capacity
Stablecoins are cryptocurrencies designed to maintain a stable price. The majority of them, such as Tether (USDT) or USD Coin (USDC), are pegged to the U.S. dollar. The aggregate share of both of them is 99% of the stablecoin market. In the meantime, the stablecoins that are backed by euros are too small, having a total market value of less than 350 million euros.
These stablecoins are increasingly finding their way into the traditional finance system, which is a concern to ECB. Stablecoins are starting to be used or considered by companies such as Visa, Mastercard, Amazon, and Walmart to use in payments and savings. Such an increased adoption poses a threat to the banks because individuals may begin to utilize stablecoins over regular savings accounts. In case of that, banks may lose deposits and then they will find it difficult to extend loans.
Moreover, widespread adoption of the stablecoins pegged to the dollar may also be beneficial to the U.S. It can enable the U.S. government to borrow at a cheaper rate and strengthen its financial powers. Instead, Europe might have to pay more expensive loan rates and lose the power to regulate its currency.The Bank of International Settlements (BIS) has cautioned that stablecoins could weaken a country’s control over its monetary policy. This risk is especially significant for smaller or developing economies. Stablecoins may bypass traditional financial systems, reducing the effectiveness of national regulations.
Stablecoin Market Could Hit $2 Trillion by 2028
Meanwhile, the U.S. has taken steps to regulate stablecoins. The GENIUS Act provides a legal framework for digital assets, though it remains softer than Europe’s MiCA regulation. This lighter approach could potentially accelerate market growth. Experts project the stablecoin market will expand to $2 trillion by 2028, up from $230 billion today. Unless Europe modernizes its regulations and moves at speed, it will be left behind.
Related Reading: Western Union Plans Stablecoin Integration After GENIUS Act Approval
Europe can do a number of things to address this issue. First, it is supposed to endorse euro-based stablecoins that are secure, trustworthy, and properly regulated. These can aid in the decrease of such reliance on dollar-backed assets. The European Central Bank aims to introduce the digital euro as a central bank digital currency to offer a safe and official alternative to private stablecoins. This move would strengthen public trust and reduce dependence on unregulated digital assets. Europe also recognizes the need to invest in emerging technologies like distributed ledger technology (DLT). These innovations can significantly improve the speed and efficiency of payments, especially for cross-border transactions.
The ECB already raised the alarm on dollar-backed stablecoins in April 2025. The message by Schaaf now strengthens the necessity to implement the urgent changes to the MiCA regulation and additional digital tools.
To sum up, stablecoins are not a fad anymore. They are transforming the world of finance. Europe needs to act now; otherwise, it will lose the euro and its financial autonomy. Europe has a great chance to change this menace into an opportunity with clever regulation and innovation and take the lead in the future of digital money.
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