The European Central Bank (ECB) may have to reassess its monetary policy if a run on stablecoins triggers financial turmoil, according to Dutch central bank governor Olaf Sleijpen, a member of the ECB’s Governing Council.
In an interview with the Financial Times, Sleijpen warned that the rapid growth of US-linked stablecoins could pose systemic risks to global markets — risks that could spill over into the Eurozone and potentially force the ECB to act.
Stablecoin Market Growing at Breakneck Speed
The value of stablecoins — digital tokens designed to track currencies such as the US dollar — has surged 48% this year, surpassing $300 billion. The spike follows new regulations introduced by US President Donald Trump that have enabled private-sector issuance of stablecoins backed largely by US Treasuries.
“If stablecoins in the US continue increasing at this pace, they will become systemically relevant,” Sleijpen said. “If they are not that stable, you could end up in a situation where the underlying assets need to be sold quickly.”
Such forced sales, he warned, could destabilize financial markets and feed into the wider economy, including inflation trends in Europe.
Potential Impact on ECB Monetary Policy
Sleijpen emphasized that the ECB would first rely on financial stability tools to address market stress. But in a severe scenario, monetary policy adjustments may become necessary.
The direction of potential rate changes remains unclear. “We would probably have to rethink monetary policy,” he said. “I don’t know in which direction we would be going.”
His comments reflect mounting concern within the ECB that dollar-based stablecoins could complicate the Eurozone’s ability to control liquidity and interest rates, particularly if the tokens become widely used across Europe.
Broader Policy Warnings
Sleijpen’s warning echoes earlier remarks from ECB officials who fear the Eurozone could face challenges similar to emerging markets where widespread use of the US dollar limits monetary policy effectiveness.
Nobel laureate Jean Tirole has also cautioned that governments may eventually face multi-billion-dollar bailouts if stablecoins collapse.
Eurozone Outlook Improving, but Risks Remain
Sleijpen, who succeeded Klaas Knot as head of De Nederlandsche Bank in July, said the Eurozone economy is in a “slightly better” position than earlier this year. He noted:
- Lower trade uncertainty
- Better-than-expected economic growth
- Inflation broadly aligned with the ECB’s 2% target
The ECB has delivered eight rate cuts since last year, reducing borrowing costs from 4% to 2%, and has held rates steady for five months. Markets now assign just a 25% probability of another cut next year.
Asked about whether inflation risks are skewed to the upside — a view held by ECB Executive Board member Isabel Schnabel — Sleijpen said risks are “balanced” but stressed the high level of uncertainty.
Lessons from 2022
The Dutch governor highlighted the ECB’s mistaken assumption in 2022 that inflation after Russia’s full-scale invasion of Ukraine would be temporary. That expectation proved incorrect as price pressures spread rapidly through the economy.
“For me, it is a lesson that you should be vigilant and constantly challenge whether a shock is temporary,” Sleijpen said. “A shock can feed into the rest of the economy very fast.”
