A caution was issued by Dutch central bank governor Olaf Sleijpen that if stablecoins were to become unstable, issuers might be compelled to convert their reserves, consequently escalating market stress.
The European Central Bank ECB might shortly be necessitated to perceive stablecoins not merely as a regulatory matter, but also as a potential origin of macroeconomic shocks, as indicated by Dutch central bank governor Olaf Sleijpen.
In a Financial Times discussion, it was cautioned by Sleijpen that the rapidly-growing dollar-pegged stablecoins might acquire systemic importance for Europe’s financial framework. He indicated that if the tokens were to falter, financial stability, the wider economy, and even inflation could be impacted by them.
“If stablecoins are deemed precarious, it is possible that a situation could arise where the underlying assets are required to be promptly divested,” he conveyed, emphasizing that rapid conversion could intensify market stress.
It was asserted by Sleijpen that the ECB might be compelled to “re-evaluate monetary policy” if the shocks were sufficiently intense. However, he underscored that it was uncertain whether such a scenario would necessitate rate hikes or cuts.
Stablecoin Market Cap Could Hit $2 Trillion by 2028
Sleijpen’s remarks are delivered amidst a year of dramatic expansion for the stablecoin sector. Data from CoinGecko reveals a nearly fifty percent surge in stablecoin market capitalization this year. At the time of composition, stablecoins possess an overall valuation of $310 billion.
Tether’s USDt, the foremost US dollar-pegged stablecoin on the market, expanded from a $127 billion market capitalization in November $2024 to a $183 billion market capitalization over the past year, and a forty-four percent increase was recorded.
USDC, the second-most substantial stablecoin asset, expanded by nearly one hundred percent from $37 billion to $74 billion during the same period, and an augmentation of approximately one hundred percent was observed.
In April, it was documented by the U.S. Department of the Treasury that changing market dynamics possess the capacity to hasten the expansion of stablecoins. It was forecasted by the Treasury that a $2 trillion market capitalization could potentially be attained by stablecoins by $2028.
It was mentioned by Sleijpen that as dollar-pegged stablecoins persist in their expansion, the sector might achieve a scale where their variations would bear direct relevance to Europe’s economic outlook.
Europe Raises Concerns Over Dollar-Backed Stablecoins
In April, an article was penned by ECB Executive Board member Piero Cipollone that underscored anxieties regarding the expansion of dollar-backed stablecoins.
It was contended by him that introducing a central bank digital currency (CBDC) could assist in safeguarding monetary supremacy in the eurozone. He declared that the potential for foreign currency stablecoins to evolve into a more common medium of exchange in Europe can be restricted by a digital euro.
Apprehensions were likewise voiced by Italy’s Minister of Economy and Finance, Giancarlo Giorgetti, over U.S. dollar stablecoins. In April, it was declared by Giorgetti that stablecoins are a more considerable menace to European financial stability than trade tariffs.
While apprehensions were evident regarding stablecoins, Sleijpen’s remarks underscore a more urgent concern: that stablecoin issuers could be transformed into conduits for financial turmoil. Should major issuers dispose of reserves at scale, a ripple effect could propagate into liquidity conditions, asset prices, and inflation.
In September, a cautionary statement was issued by Nobel Prize-winning economist Jean Tirole that governments could face multibillion-dollar bailout demands if major stablecoins were to destabilize.
