ECB Warns US Stablecoins Could Weaken EU Financial Stability

Highlights:

• The ECB has raised concern over the dominance of U.S. stablecoins in the market.
• The bank highlighted the two bills introduced in the United States, meant to increase adoption.
• Tensions grow as the ECB pushes for changes while the Commission defends crypto rules and stablecoin oversight.

The European Central Bank has warned that rising support for stablecoins in the United States could lead to a shift in financial power. They warn the move could raise the risk of European capital flowing into dollar-based assets. According to a paper seen by Politico, the bank is concerned that proposed US laws could drive a surge in dollar-backed stablecoins. The surge may weaken the position of the euro and cause liquidity stress within the European banking system.

The ECB has warned that U.S. support for crypto under Trump could pose financial risks to Europe and called for changes to MiCA rules. The European Commission dismissed the concerns, saying current regulations are sufficient. The key issue is the potential threat of USD…

— Wu Blockchain (@WuBlockchain) April 22, 2025

The ECB wants the MiCA rules to be modified. The bank believes the growing influence of dollar-backed tokens poses a danger to the financial system in Europe. The two bills in question from the US, named STABLE and GENIUS, aim to expand the global reach of stablecoins backed by the dollar.

The ECB fears these developments could trigger a capital shift towards American assets. In addition, they could leave banks exposed if local issuers are forced to redeem tokens held by both EU and non-EU investors. Italy’s finance minister recently raised the same concern about the dominance of U.S. stablecoins.

Tether, which issues the most-used stablecoin in the world, has already faced limits under MiCA. Tether’s CEO had argued earlier that requiring reserves to be stored mainly in European bank accounts could hurt both the stablecoin and the banks. Currently, most of the $240 billion stablecoin market is backed by the US dollar.

Commission Dismisses ECB Concerns in Policy Clash

While the ECB calls for updates to the rules, the European Commission has pushed back strongly. It argues that the laws in place can deal with the risks raised. In its paper, also seen by Politico, the commission described the ECB’s warnings as overstated.

In addition, it said that the law already gives enough control over who can issue stablecoins and in what amount. It also pointed out that crypto asset providers must follow clear terms to operate in Europe. It also confirmed that some platforms have already removed stablecoins like Tether as a result.

The policy clash became public after a meeting of top finance officials on April 14. Both the ECB and the Commission shared separate papers showing deep disagreement. According to two diplomats and one EU official, most EU countries did not support immediate changes to the law based on the current situation. One diplomat said that there was a clear difference in how both sides view the risks.

Officials also questioned the idea of a run on an asset-backed one-to-one, calling it unrealistic. They noted that the design of the rules already addresses those risks. The commission stated that only one global stablecoin has received full clearance under the law.

Wider Fears Around Financial Independence and Political Intentions

The ECB also warned that these US-backed stablecoins could give non-EU firms more market control. The move could drive investment away from European financial instruments and strengthen the US dollar’s hold over global payments. It argued that the multi-issuer model, where European and foreign firms issue tokens together, could increase the chance of a financial shock if reserves fall short.

The bank also suggested that the model could damage the EU’s efforts to build a stronger financial system of its own. Some officials said the ECB might be using this concern to win support for its digital euro plan. The plan aims to protect European financial systems from outside influence.