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Stablecoin Market Exceeds $280B as ECB Warns of Potential Systemic Risks

Stablecoin Market Exceeds $280B as ECB Warns of Potential Systemic Risks

Bitget-RWA2025/11/25 06:12
By:Bitget-RWA

- Stablecoin market exceeds $280B, driven by regulatory clarity and institutional adoption, capturing 8% of crypto assets. - ECB warns of systemic risks from stablecoin concentration, de-pegging events, and mass redemption "runs" threatening global markets. - USDC overtakes USDT in onchain activity due to regulatory alignment, with Circle's market cap rising 72% YTD to $74B. - ECB calls for global regulatory coordination to address cross-border arbitrage gaps and prevent destabilizing retail deposit shifts

The total value of stablecoins has now exceeded $280 billion, making up 8% of the entire crypto-asset sector, as clearer regulations and greater institutional involvement fuel expansion. Nevertheless,

, highlighting the systemic dangers that could arise from the swift growth of stablecoins, especially due to their concentration and increasing ties to conventional financial systems.

Analysts at JPMorgan observed that Circle's

has surpassed Tether's in terms of on-chain transactions, a change credited to regulatory compliance and a preference among investors for transparent, regulation-friendly stablecoins. USDC’s capitalization has climbed 72% so far this year to reach $74 billion, outpacing USDT’s 32% rise, even though USDT still holds a larger share of the market . This shift signals growing institutional trust in stablecoins that comply with regulations such as the EU’s Markets in Crypto-Assets Regulation (MiCA), which became effective in 2024 .

The ECB’s recent publication emphasizes that while stablecoins are overwhelmingly backed by U.S. dollar assets (accounting for 99% of the $280 billion total), they could threaten financial stability if not properly managed. The central bank pointed to two main risks: the possibility of “de-pegging” events—where stablecoins lose their dollar value—and the systemic consequences of a large-scale redemption event. In such cases, issuers might be forced to sell off reserve holdings, including U.S. Treasury securities, potentially causing disruptions in global markets

. (USDT) and (USDC), whose reserves rival those of the biggest money market funds, are particularly vulnerable .

Stablecoin Market Exceeds $280B as ECB Warns of Potential Systemic Risks image 0
The ECB also expressed concern that stablecoins could draw retail deposits away from traditional banks. If more households opt for stablecoins over insured bank accounts, banks may face unstable funding and become more dependent on volatile wholesale deposits. The EU’s MiCA rules prohibit stablecoins from paying interest to address this risk, but the U.S. has not yet implemented similar measures .

Regulatory arbitrage across borders adds further complexity. Differences in reserve and redemption standards between regions—for example, when stablecoins are jointly issued by EU and non-EU entities—could hinder regulators’ ability to enforce adequate protections. The ECB urged for international cooperation through organizations like the G20 and Financial Stability Board to close these regulatory gaps

.

Despite these challenges, stablecoin usage remains heavily concentrated in crypto trading, with stablecoins involved in 80% of centralized exchange transactions. Retail applications, such as international remittances or protecting against inflation in developing economies, are still minimal, making up just 0.5% of total transaction volume

. Still, forecasts indicate the stablecoin sector could grow to $2 trillion by 2028, which would increase systemic risks .

The ECB’s cautions are echoed by other central banks, such as the Dutch National Bank’s governor, who warned that stablecoins could disrupt the eurozone’s banking sector. On the other hand, some industry leaders, including Coinbase’s chief policy officer, maintain that fully backed stablecoins are actually safer than conventional banking models

.

As regulators strive to balance innovation with financial stability, the future will depend on harmonizing global standards to prevent systemic risks while encouraging responsible development.

0

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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