ECB Encounters Unparalleled Hurdle as Stablecoins Weaken Authority Over Monetary Policy

Olaf Sleijpen, governor of the Dutch central bank, cautioned in an interview with the Financial Times that the European Central Bank (ECB) could encounter new and significant risks as stablecoins—especially those pegged to the US dollar—become systemically important. Sleijpen pointed out that the rapid destabilization of stablecoins, due to their dependence on assets such as US Treasuries, might spark macroeconomic disruptions and compel the ECB to reevaluate its approach to monetary policy.

. "If stablecoins are than stable, you could face a scenario where the underlying assets must be liquidated in haste," he remarked, stressing the potential for widespread market turmoil during a redemption crisis.

The total value of stablecoins has climbed by almost 50% this year, now standing at $310 billion, with Tether's and Circle's at the forefront. USDt’s capitalization increased by 44% to $183 billion, while USDC . The US Treasury estimates that the sector’s value could reach $2 trillion by 2028, heightening European worries that foreign currencies could erode monetary independence. Piero Cipollone, a member of the ECB Executive Board, has previously stated that a digital euro is crucial to counteract this development.

The dangers go beyond simple market swings. A large-scale rush to redeem stablecoins could force issuers to sell off reserves quickly, unsettling bond markets and making it harder for the ECB to manage inflation. The European Systemic Risk Board (ESRB) has voiced concerns about "multi-issuer" setups, where the same tokens are issued both inside and outside the EU, potentially draining European liquidity in times of stress

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To address these threats, the ECB and European regulators are speeding up their contingency strategies. A group of nine leading European banks, including ING and UniCredit, is working on a euro-backed stablecoin under the MiCA rules, aiming to decrease reliance on US dollar-based assets. At the same time, the Bank of England has introduced temporary caps—20,000 pounds for individuals and 10 million pounds for companies—to help prevent destabilizing redemption surges.

Nonetheless, regulatory inconsistencies continue to pose challenges. The European Banking Authority (EBA) has observed that the current MiCA protections may not fully resolve the risks of multiple issuers, pending further guidance from the European Commission

. French authorities have called for unified supervision by the European Securities and Markets Authority, a step that could create legal ambiguities for stablecoin issuers.

Sleijpen’s concerns highlight a larger discussion about how central banks should respond to a financial system increasingly influenced by private digital currencies. "I can’t say which way we would move [regarding interest rates]," he conceded, pointing to the uncertainty caused by stablecoin-related shocks. As the ECB advances its digital euro initiative, scheduled for 2029, policymakers must balance encouraging innovation with maintaining financial stability.