European Central Bank (ECB) financial stability experts have stated that risks associated with stablecoins in the Eurozone are limited due to low adoption rates and preventive regulation.
The ECB released a pre-publication version of its financial stability review on Monday, specifically discussing the growing stablecoin market, which consists of digital assets pegged to the value of fiat currencies or commodities.
The report, authored by ECB financial stability experts Senne Aerts, Claudia Lambert, and Elisa Reinhold, questions the use cases of stablecoins beyond crypto trading and emphasizes their low financial stability risks in the Eurozone.
"Currently, the financial stability risks posed by stablecoins within the Eurozone are limited, but their rapid growth demonstrates the need for close monitoring, while addressing the risks of cross-border regulatory arbitrage," the report states.
"At present, crypto trading is the most significant use case for stablecoins," the authors noted, adding that other use cases, such as cross-border payments, "play only a secondary role."
The report cites a study from the International Monetary Fund (IMF) in July, which indicated that a significant portion of stablecoin flows is cross-border, but points out the lack of evidence linking these flows to remittance systems.
The report also highlights the limited use of stablecoins in retail transactions, citing Visa's estimate that only about 0.5% of stablecoin transaction volume consists of organic, retail-scale transfers (below $250).
"The use of stablecoins appears to be primarily driven by their role in the crypto asset ecosystem, and whether stablecoins will be widely adopted in other use cases remains to be seen," ECB staff summarized.
The report states that since stablecoins are not widely used for transactions involving real-world assets, particularly within the Eurozone, the stablecoin market does not pose an urgent financial stability risk to Europe.
Despite stablecoins pegged to the dollar—such as Tether's USDt and Circle's USDC—dominating the market by as much as 84%, their connection to Eurozone financial markets is limited.
The authors wrote that even if stablecoin use cases increase and their connection to the Eurozone grows, the EU's crypto regulatory framework, the Markets in Crypto-Assets Regulation (MiCA), will mitigate potential risks, adding:
Among the specific measures to limit stablecoin-related risks, the authors mentioned MiCA's prohibition on stablecoin issuers and crypto asset service providers paying interest to stablecoin holders.
The authors noted that a banking group led by the Bank Policy Institute has been calling for a similar ban to be implemented in the U.S., with federal regulators expected to release final implementation regulations for the GENIUS Act focused on stablecoins in 2026 or 2027.
The ECB's latest report highlights a significant shift in the EU's stablecoin agenda, as executive board members like Piero Cipollone have previously warned that U.S. stablecoins pose a threat to Europe's payment sovereignty, reinforcing the case for launching a digital euro.
As the ECB plans to pilot the digital euro in 2027 and potentially issue it for the first time in 2029, the institution is advancing while continuing to monitor and address stablecoin-related risks.
Related: NYSE approves Grayscale's Dogecoin (DOGE) and Ripple (XRP) ETFs, allowing them to be listed on Monday.
Original: “ECB: Stablecoin risks in Europe seen as minimal under low adoption and MiCA regulation”
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