Financial stability experts at the European Central Bank (ECB) said stablecoin-related risks in the euro area are limited due to low adoption and preventative regulation.
The ECB on Monday published its financial stability review pre-release, devoting it to the growing market of stablecoins, which are digital assets pegged to the value of fiat currencies or commodities.
Authored by ECB financial stability experts Senne Aerts, Claudia Lambert and Elisa Reinhold, the report questioned stablecoin use cases beyond crypto trading and highlighted their low financial stability risks in the euro area.
“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,” the report said.
Crypto trading remains a key use case for stablecoins
“At present, crypto trading constitutes by far the most important use case for stablecoins,” the authors said, adding that other use cases, such as cross-border payments, “play only a minor role.”
Citing a July study by the International Monetary Fund, the report said that a large share of stablecoin flows were cross-border, but noted a lack of evidence that these flows were systemically linked to remittances.
The report also highlighted limited stablecoin use in retail transactions, referring to Visa’s estimates that only about 0.5% of stablecoin volumes were organic, retail-sized transfers (less than $250).
“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,” the ECB staff concluded.
US dollar stablecoins are less interconnected with euro markets
With stablecoins not being widely used for transactions involving real-world assets, especially within the euro area, the stablecoin market does not pose urgent financial stability risks for Europe, the report said.
And although US dollar-pegged stablecoins — such as Tether’s USDt (USDT) and Circle’s USDC (USDC) — dominate the market at a whopping 84%, their interconnections with euro area financial markets are limited.
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Even if stablecoin use cases rose, and even if interconnections with the euro area were to grow, the European Union’s crypto regulatory framework, Markets in Crypto-Assets Regulation (MiCA), would mitigate potential risks, the authors wrote, adding:
“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.”
Among specific measures to restrict stablecoin-related risks, the authors mentioned MiCA’s prohibition of paying interest on stablecoin holdings by both stablecoin issuers and crypto asset service providers.
The authors noted that banking groups led by the Bank Policy Institute have been calling for similar bans in the US, with federal regulators expected to issue final implementing regulations on the stablecoin-focused GENIUS Act in 2026 or 2027.
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The latest ECB report highlights a notable shift in the EU’s stablecoin agenda, with executive board members such as Piero Cipollone previously warning that US stablecoins pose a threat to Europe’s payment sovereignty, strengthening the case for a euro central bank digital currency.
With the ECB targeting a digital euro pilot in 2027 and potential first issuance in 2029, the institution is progressing while continuing to monitor and address stablecoin-related risks.
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