Stablecoins on the rise: still small in the euro area, but spillover risks loom

Prepared by Senne Aerts, Claudia Lambert and Elisa Reinhold

Stablecoins have captured widespread attention in recent months on account of their rapid growth, raising potential concerns for financial stability.^[1] Stablecoins are experiencing rapid growth, pushing their market capitalisation to new all-time highs. From a financial stability perspective, this may raise concerns arising from certain structural weaknesses inherent to stablecoins and their interconnectedness with traditional finance. This box explores the key risks and vulnerabilities associated with stablecoins, such as de-pegging and runs.^[2] It explains the most important use cases for stablecoins and how risks could evolve if this market were to experience further significant growth. Finally, the box reflects on global regulatory developments and how the risks posed by cross-border regulatory arbitrage could be mitigated.

Fuelled by broadening investor interest and global regulatory developments, the combined market capitalisation of all stablecoins has reached an all-time high. It now exceeds USD 280 billion, accounting for roughly 8% of the total crypto-asset market (Chart A, panel a). Two US dollar-denominated stablecoins dominate the market, with Tether (USDT) and USD Coin (USDC) accounting for USD 184 billion (63%) and USD 75 billion (26%) of stablecoin market capitalisation respectively. While US dollar-denominated stablecoins make up around 99% of all stablecoin supply in circulation, euro-denominated stablecoins play a minor role, totalling only around €395 million (Chart A, panel b). Recent regulatory clarity may have been a driver of the soaring demand for stablecoins. The EU has taken significant steps to regulate crypto-assets through the full implementation of its Markets in Crypto-Assets Regulation (MiCAR)^[3] last year, providing clear rules for stablecoin issuers and those offering stablecoin-related services. The United States has recently followed suit with the passage of its Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act), thereby offering some regulatory clarity for stablecoin issuers. Other jurisdictions, such as Hong Kong, have also introduced legislation to regulate stablecoins.^[4]

Chart A

Stablecoin market capitalisation has grown quickly and US dollar-denominated stablecoins continue to dominate

a) Size of stablecoins in the crypto-asset ecosystem	b) Market capitalisation of euro-denominated MiCAR-authorised stablecoins
(1 Jan. 2020-16 Nov. 2025, weekly data; left-hand scale: USD billions, right-hand scale: percentages)	(1 Jan. 2024-17 Nov. 2025, weekly data, € millions)

At present, crypto trading constitutes by far the most important use case for stablecoins. Stablecoins are used as an easy way in and out of the crypto ecosystem while eliminating the need for traders to repeatedly convert back to fiat currencies. Stablecoins like USDT and USDC are now the preferred units for trading on crypto trading platforms. Around 80% of all trades executed globally on centralised crypto trading platforms involve stablecoins, which shows that stablecoins have become essential for the functioning of the crypto-asset ecosystem.^[5] Other use cases for stablecoins do exist but play only a minor role. Cross-border payments are a frequently cited use case, as crypto-assets flow easily across borders.^[6] Although research suggests that over 70% of stablecoin flows are cross-regional there is, however, a lack of concrete evidence that stablecoins are used systematically for remittances and other cross-border transactions.^[7] In addition, it has been claimed that stablecoins are used as a store of value in emerging markets and developing economies, especially in countries facing high inflation.^[8] However, the available data indicate that the retail use of stablecoins represents a tiny share of total stablecoin volumes. It is estimated that only around 0.5% of volumes are organic retail-sized transfers.^[9] In conclusion, the use of stablecoins seems to be primarily driven by their role within the crypto-asset ecosystem, and it remains to be seen whether stablecoins will be adopted widely across other use cases.

Stablecoins may pose financial stability risks through their inherent vulnerabilities and their interconnectedness with traditional finance. Stablecoins’ primary vulnerability is that investors lose confidence that they can be redeemed at par. This loss of faith can simultaneously trigger a run on a stablecoin and cause a de-pegging event. Given the importance of stablecoins in the crypto ecosystem, a large adverse stablecoin shock would be detrimental for crypto markets. However, other market segments could also be affected through spillovers and second-round effects, including those arising from wealth effects and interconnections with traditional finance.^[10] These interlinkages exist primarily through stablecoins that are backed by fiat-denominated asset reserves, such as USDT and USDC. As the two largest stablecoins, they now rank among the largest holders of US Treasury bills and have asset reserves that are comparable to the top 20 largest money market funds (Chart B, panel a). Moreover, they have been among the largest net acquirers of short-term US Treasuries in recent months (Chart B, panel b). A run on these stablecoins could trigger a fire sale of their reserve assets, which could affect the functioning of US Treasury markets.^[11] This could pose a significant risk if stablecoins, and their corresponding asset reserves, continue to grow rapidly, with some projections suggesting that market capitalisation could reach USD 2 trillion by 2028.^[12] These risks could become especially great if current extreme levels of concentration persist, with just two issuers accounting for around 90% of all stablecoins in circulation. This situation could be difficult to change, given the inherent interchangeability frictions across different stablecoins.^[13] As a result, the failure of just one entity could have a widespread impact, even in the absence of a systemic stablecoin crisis.^[14]

Chart B

Stablecoin issuers hold significant amounts of traditional financial assets, comparable to the world’s largest MMFs, while ranking among the largest purchasers of short-term US Treasuries

a) USDT and USDC reserve assets and assets under management of the 20 largest MMFs	b) Net purchases of short-term US Treasuries since January 2024
(Q3 2025, USD billions)	(Jan. 2024-Sep. 2025, USD billions)

Significant growth in stablecoins could cause retail deposit outflows, diminishing an important source of funding for banks and leaving them with more volatile funding overall. If stablecoins are adopted widely, households may replace some of their bank deposits with stablecoin holdings. These outflows could be amplified if crypto-asset service providers, such as crypto trading platforms, were allowed to pay interest on stablecoin holdings, increasing stablecoins’ relative attractiveness and causing banking disintermediation. In Europe, however, MiCAR prohibits the payment of interest on stablecoin holdings by stablecoin issuers and crypto-asset service providers, with banks calling for similar bans in the United States.^[15] In any case, on an aggregate level retail deposit outflows would be at least partially recovered as wholesale deposits. This could occur directly, since stablecoin issuers hold some of their reserves as deposits with banks,^[16] or indirectly, through deposits made by the entities from which stablecoin issuers purchase their reserve assets. The critical issue here is that wholesale funding is typically far less stable. Specifically, deposits made by stablecoin issuers may be subject to sudden withdrawals in the event of a stablecoin run, leaving bank funding structures more vulnerable to shocks.^[17] Deposit concentration could also increase, as many banks may face retail outflows, while only a few attract wholesale inflows.

Global discrepancies across jurisdictions constitute the primary source of stablecoin risk for the euro area. Despite the many similarities across various sets of legislation, important differences remain regarding reserve requirements and whether or not redemption fees are permitted, for example. These differences facilitate regulatory arbitrage. Notably, risks may arise through third-country multi-issuance, where an EU entity and a third-country entity jointly issue a fungible stablecoin both in the EU and in a non-EU jurisdiction. This could leave EU issuers with insufficient reserve assets under the supervision of EU authorities to fulfil the combined redemption requests made by EU and non-EU token holders, amplifying run risks in the EU. Such risks call for additional safeguards, imposing preconditions that must be met before EU market access is authorised.^[18]

Currently, financial stability risks stemming from stablecoins are limited within the euro area, but the rapid growth justifies close monitoring, while risks stemming from cross-border regulatory arbitrage should be resolved. Stablecoins are not widely used for transactions involving real-world assets, especially within the euro area, nor have they already caused significant retail deposit outflows. Moreover, US dollar-denominated stablecoins dominate in the stablecoin market, limiting stablecoins’ interconnections with euro area financial markets through their reserve assets. Even if stablecoins were to be adopted across a wider set of use cases, and even if interconnections with the euro area were to grow, the EU has implemented a stringent regulatory framework through MiCAR that would mitigate potential risks. Nevertheless, stablecoins are growing rapidly and they may find adoption across new use cases, which could introduce financial stability risks in the future. Moreover, to mitigate risks posed by cross-border regulatory arbitrage and diminish spillover risks from inadequately regulated jurisdictions, it is vital that regulatory frameworks are further aligned at a global level. This can be achieved through the global implementation of the G20’s crypto-asset roadmap, which includes the Financial Stability Board’s recommendations on regulating crypto-asset markets and activities, the Basel standard for banks’ exposures to crypto-assets and the Financial Stability Board’s recommendations for regulating global stablecoin arrangements.^[19]