The European Central Bank (ECB) has warned that the rapid expansion of stablecoins—despite their still-limited footprint in the euro area—poses emerging financial-stability risks, especially as interlinkages with global markets deepen.
The findings come from the ECB report Stablecoins on the rise: still small in the euro area, but spillover risks loom, prepared by Senne Aerts, Claudia Lambert and Elisa Reinhold, which examines structural vulnerabilities, use cases and cross-border risks tied to the accelerating stablecoin ecosystem.
Stablecoin Market Hits $280 Billion, Dominated by USDT and USDC
According to the authors, the combined market capitalisation of all stablecoins has surged past $280 billion, reaching an all-time high and accounting for roughly 8% of the total crypto-asset market. Two US dollar-denominated stablecoins dominate overwhelmingly: Tether (USDT) with $184 billion and USD Coin (USDC) with $75 billion.
By contrast, euro-denominated stablecoins remain negligible at only €395 million, highlighting the extreme currency imbalance in the market. The ECB attributes the demand surge partly to global regulatory clarity, including the EU’s recent implementation of the Markets in Crypto-Assets Regulation (MiCA) and the US GENIUS Act.
Crypto Trading Remains the Primary Use Case
The ECB report stresses that today’s stablecoin market is overwhelmingly driven by trading activity rather than real-world payments. Around 80% of trading activity on centralised crypto exchanges involves stablecoins, underscoring their role as the core settlement asset in crypto finance.
While stablecoins are often cited as tools for cross-border payments or stores of value in high-inflation economies, the ECB notes limited evidence of broad consumer use. Only 0.5% of stablecoin volumes appear to be organic retail transactions, suggesting real-world adoption remains minimal.
De-Pegging, Runs and Treasury-Market Spillovers Highlight Key Risks
The authors warn that stablecoins face significant structural vulnerabilities, with de-pegging events and redemption runs posing the most immediate threats. Because leading stablecoins are backed by large reserves of traditional financial assets—primarily US Treasury bills—their growth has tied them directly to global financial markets.
Both USDT and USDC now rank among the largest holders of US Treasuries, with reserve portfolios comparable in scale to the world’s top 20 money market funds. A sudden run could trigger fire sales of US treasuries, potentially disrupting the functioning of the world’s most important funding market.
The report notes that if stablecoin supply continues growing at its current pace, market capitalisation could approach $2 trillion by 2028, amplifying spillover risks—especially given the extreme concentration, with just two issuers controlling about 90% of supply.
Regulatory Arbitrage Remains a Major Concern
Despite MiCA’s strict framework in the EU, global inconsistencies create opportunities for cross-border regulatory arbitrage. The ECB highlights the risk of multi-jurisdiction issuance of fungible tokens, which could leave EU regulated issuers under-reserved relative to global redemption demands.
The authors conclude that while stablecoins remain small in the euro area, rapid international growth—and deepening ties to traditional markets—justify close monitoring. They call for global regulatory alignment, consistent with the G20 roadmap and Financial Stability Board recommendations, to mitigate cross-market contagion risks.
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