Key Takeaways:

• Stablecoins are becoming big enough to pose real financial risks, according to an ECB official.
• Depending on how the shock impacts the economy, the ECB may need to either cut rates or raise them.
• Officials warn that dollar-based tokens becoming dominant could reduce the ECB’s ability to steer interest rates.

The European Central Bank (ECB) is sounding the alarm about risks coming from one of crypto’s fastest-growing sectors: stablecoins.

While these tokens are designed to maintain a steady value, a sudden loss of confidence could trigger market turmoil large enough to impact Europe’s economy, and even force the ECB to reconsider its interest rates.

Stablecoins are growing fast and so are the risks

Stablecoins have experienced significant growth this year, with their total value increasing nearly 50% to exceed $300 billion. Many of these coins, especially those based on the dollar, are backed by U.S. Treasury securities.

New U.S. rules allowing private companies to issue stablecoins have accelerated that trend.

But Dutch central bank governor Olaf Sleijpen warned that if people suddenly rush to cash out, issuers may have to sell their reserves quickly. That could shake financial markets, especially if the reserves include vast amounts of U.S. government debt.

“If stablecoins are not that stable,” Sleijpen said, their collapse could hit Europe’s financial system, the economy, and even inflation.

Why stablecoin risks could force the ECB to change its rate policy

If a primary stablecoin were to unravel, the shockwaves wouldn’t stay in crypto. Rapid asset sell-offs could trigger market volatility or liquidity shortages. That, Sleijpen said, might force the ECB to “rethink monetary policy.”

In simple terms, the ECB might have to:

• Cut rates if markets freeze or recession risks spike.
• Raise rates if inflation jumps due to financial instability.

Sleijpen admits it’s impossible to know which direction the ECB would take; it depends on how the crisis hits the broader economy. Before adjusting rates, he emphasized that the ECB would first attempt to utilize financial stability tools, such as liquidity backstops or tighter safeguards.

Other officials share similar concerns. ECB president Christine Lagarde warned in September that Europe could end up facing a problem familiar in emerging economies. When foreign-currency assets (such as dollar stablecoins) become too dominant, local interest-rate policy loses its effectiveness.

Europe is watching closely as policy uncertainty grows

Sleijpen, who became the Netherlands’ central bank chief in July 2025, says the eurozone is currently in a “slightly better” place: inflation is near the ECB’s 2% goal, growth is stronger than expected, and trade uncertainty has eased. That’s why the ECB has left interest rates unchanged for five months.

However, he also emphasized that 2022 taught Europe a painful lesson: shocks can spread rapidly. The ECB initially thought inflation caused by Russia’s invasion of Ukraine would be temporary, until it wasn’t.

Policymakers now see stablecoins as another potential flashpoint. Some economists, including Nobel Prize winner Jean Tirole, even warn that governments may face multibillion-dollar bailouts if a primary token collapses.

For now, the ECB isn’t moving rates. But if stablecoins destabilize markets, Europe’s central bankers may have no choice but to respond.