The European Central Bank (ECB) has issued a strong warning about the risks of “cross-border regulation” in the stablecoin sector, calling for a unified global regulatory framework. The message, delivered in a XEM of its Financial Stability Review report, due to be published in full this week, shows Europe is increasingly concerned about the rapid growth of the stablecoin market.
According to data updated to November 2025, the total market Capital of stablecoins has exceeded 280 billion USD, accounting for about 8% of the total global crypto market value. USDT and USDC still maintain absolute dominance with nearly 90% market share. The reserve assets backing these two coins are even equivalent to the size of the 20 largest money market funds in the world - a figure that shows that stablecoins are getting "closer" to the traditional financial system instead of just being a tool in the crypto market.
The ECB believes that the growing popularity of stablecoins could lead a large proportion of households to shift their bank deposits into digital assets, thereby weakening the banking system’s retail Capital and making Capital flows more volatile. Europe has gone ahead by introducing the MiCAR framework, which prohibits stablecoin issuers in the region from paying interest to holders, to limit the practice of shifting deposits into stablecoins to earn yields. Meanwhile, in the US, where President Donald Trump — who returned to the White House after winning in late 2024 — has taken a more open stance towards the crypto market, banks are pressing lawmakers to adopt similar measures, citing the need to protect financial stability.
The report also highlights that the rapid growth and increasing links between stablecoins and the banking system could become a “trigger point” for massive Capital withdrawals in times of crisis. The ECB is particularly concerned about cross-border issuance mechanisms, where EU institutions could face large-scale stablecoin redemption requests from global users that exceed their liquidation . The ECB therefore calls for the establishment of controls before institutions are allowed to offer stablecoins to the market, while promoting coordinated regulatory efforts across countries.
