Stablecoin run may prompt ECB rate review, policymaker says

He warned that large, rapid redemptions from tokens tied to U.S. assets could trigger forced sales of the underlying reserves, many of which are U.S. Treasuries. In Sleijpen’s view, such selling could first strain financial stability and then affect activity and prices across the euro area.

“If stablecoins are not that stable, you could end up in a situation where the underlying assets need to be sold quickly,” Sleijpen cautioned in an interview with the Financial Times. In that scenario, the ECB would “probably have to rethink monetary policy,” though he acknowledged it is unclear whether policy would need to tighten or ease. He emphasized that financial-stability tools should be deployed before any rate changes.

Stablecoins that track currencies such as the U.S. dollar have expanded about 48% this year to more than $300 billion after new U.S. rules enabled broader private-sector issuance, Sleijpen noted. He argued the swelling market could become systemically relevant for Europe if shocks in U.S. markets are transmitted through these tokens.

Within the ECB, officials have flagged the risk that rising use of dollar-denominated tokens could import dynamics seen in economies where heavy dollar use complicates control of interest rates and money supply. Economist Jean Tirole has warned that governments could face sizable bailout costs if the assets unwind disorderly.

Assessing the outlook, Sleijpen judged the ECB to be in a “slightly better” place than in early summer, pointing to lower trade uncertainty, stronger-than-expected growth, and inflation broadly aligned with the 2% target. Based on staff projections and data since September, he sees no case to change rates now. After eight quarter-point cuts that halved the deposit rate to 2%, the ECB has kept policy unchanged for five months. Derivatives markets imply roughly a one-in-four chance of another quarter-point cut by the end of next year.

On inflation risks, he described the balance as even. The Governing Council will continue to decide meeting by meeting and rely on incoming data, he indicated. While staff in September projected six quarters of below-target inflation, Sleijpen argued that this alone does not justify a cut, saying the undershoot reflects lower energy prices and a stronger euro, with household expectations steady.

Sleijpen took over as president of De Nederlandsche Bank in July, succeeding Klaas Knot at the end of Knot’s second seven-year term. Knot is viewed by some policymakers as a potential candidate to succeed Christine Lagarde when her term as ECB president ends in October 2027.

Stablecoin developments are attracting attention across jurisdictions. As GNcrypto reported previously, the Bank of England proposed a framework for sterling stablecoins, including temporary holding caps and reserve requirements for systemic issuers – £20,000 per consumer and £10 million per business. Officials aim to finalize the rules after consultation and are exploring liquidity backstops for gilt sales.