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The stablecoin market, or cryptocurrencies with stable value, had a capitalisation of $300 billion by the end of 2025, with only two of these cryptocurrencies, both pegged to the dollar - Tether (USDT) and USD Coin (USDC) - representing 90% of a market that connects the financial system with the volatile world of Bitcoin, Ethereum, etc.

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Text: Senne Aerts, Claudia Lambert and Elisa Reinhold

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STABLECOINS, cryptocurrencies that seek to maintain a stable value linked to a fiat currency, are experiencing accelerated growth, driving their market capitalisation to new historical highs. From a financial stability perspective, this can raise concerns stemming from certain inherent structural weaknesses of these currencies and their interconnection with traditional finance.

This text explores the key risks and vulnerabilities associated with stablecoins, such as loss of parity (de-pegging) and massive fund withdrawals (runs). It explains the most important use cases for stablecoins and how risks could evolve if this market experienced significant additional growth. Finally, the text reflects on global regulatory advances and how the risks posed by cross-border regulatory arbitrage could be mitigated.

REGULATORY CLARITY
Driven by growing investor interest and global regulatory advances, the combined market capitalisation of all stablecoins has reached historical highs. As of November 2025, it already exceeded $280 billion, representing approximately 8% of the total crypto asset market (Graph A a).

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“The recent regulatory clarity - in Europe with the MiCAR Regulation and in the US with the GENIUS Act - has driven its growth”

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Two dollar-denominated stablecoins dominate the market: Tether (USDT) and USD Coin (USDC), which represent $184 billion (63%) and $75 billion (26%) of the stablecoin market capitalisation, respectively. While dollar-denominated stablecoins account for around 99% of the total supply in circulation, euro-denominated stablecoins play a minor role, totalling only about €395 million (Graph A b).

GRAPH A. MARKET CAPITALISATION OF STABLECOINS

The recent regulatory clarity may have been a driver for the strong increase in demand for these currencies. The European Union has taken significant steps to regulate crypto assets through the full implementation of its Markets in Crypto-Assets Regulation (MiCAR) last year, establishing clear rules for issuers and those offering related services.

The United States has recently followed suit, with the approval of its Guidance and Establishment of National Innovation for US Stablecoins Act (the GENIUS Act), thus providing some regulatory clarity for stablecoin issuers. Other jurisdictions, such as Hong Kong, have also introduced new legislation to regulate stablecoins.

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“They have become essential for the crypto asset market, being involved in 80% of transactions”

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Currently, trading of crypto assets is by far the most important use case for stablecoins. They are used as an easy way to enter and exit the crypto ecosystem, eliminating the need for traders to repeatedly convert their assets back to fiat currencies. Stablecoins like USDT and USDC are now the preferred units for trading on crypto asset exchange platforms. Around 80% of all trades executed globally on centralised platforms involve stablecoins, demonstrating that they have become essential for the functioning of the crypto asset ecosystem.

There are other use cases for stablecoins, but they play a minor role. Cross-border payments are a frequently cited use case, as crypto assets flow easily across borders. Although research suggests that over 70% of stablecoin flows are interregional, there is, however, a lack of concrete evidence that they are systematically used for remittances and other cross-border transactions. Furthermore, it has been claimed that stablecoins are used as a store of value in emerging markets and developing economies, particularly in countries facing high inflation. Nevertheless, available data indicates that retail usage represents a tiny fraction of total volumes; it is estimated that only around 0.5% of volumes correspond to organic retail-sized transfers. In conclusion, the use of stablecoins appears to be driven primarily by their role within the crypto asset ecosystem, and it remains to be seen whether they will be widely adopted in other areas.

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“Loss of established parity and massive fund withdrawals are the two greatest risks of stablecoins”

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In any case, stablecoins can pose risks to financial stability due to their intrinsic vulnerabilities and their interconnection with traditional finance. The main vulnerability of stablecoins is that investors lose confidence that they can be redeemed at par (for their nominal value). This loss of faith can simultaneously trigger a massive withdrawal (run) and cause a loss of parity event (de-pegging). Given the importance of stablecoins in the crypto ecosystem, a significant negative impact would be detrimental to these markets.

However, other segments of the market could also be affected through contagion and second-round effects, including those stemming from wealth effects and interconnections with traditional finance. These links exist mainly through stablecoins, which are backed by reserves of assets denominated in fiat currency.

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“USDT and USDC hold US Treasury bills in volumes comparable to the largest money market funds. A forced sale of their reserves could affect the US debt market.”

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The two largest stablecoins, USDT and USDC, are today among the largest holders of US Treasury bills and have reserves of assets comparable to those of the 20 largest money market funds (Graph B a). Moreover, they have been among the largest net acquirers of short-term US Treasury debt in recent months (Graph B b).

GRAPH B. STABLECOINS VS MONEY MARKET FUNDS

A massive withdrawal (run) from these stablecoins could trigger a forced sale (fire sale) of their reserve assets that could affect the functioning of US public debt markets. This could pose a significant risk if stablecoins and their corresponding asset reserves continue to grow rapidly (some projections suggest that market capitalisation could reach $2 trillion by 2028).

THE FIAT CONNECTION
These risks could be exacerbated if current extreme levels of concentration persist, where only two issuers account for nearly 90% of all stablecoins in circulation. This situation could be difficult to reverse, given the inherent interchangeability frictions between different stablecoins. As a result, the failure of a single entity could have widespread impact, even in the absence of a systemic crisis of so-called stablecoins.

A significant growth of stablecoins could lead to retail deposit outflows, reducing an important source of funding for banks and leaving them, in general, with more volatile funding. If stablecoins are widely adopted, households could replace some of their bank deposits with holdings of these currencies. And these outflows could intensify if crypto asset service providers, such as trading platforms, were allowed to pay interest on stablecoin holdings, which would increase their relative attractiveness and cause banking disintermediation.

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“In Europe, the MiCAR Regulation prohibits the payment of interest on stablecoin holdings by issuers and crypto asset service providers. Banks are asking for the same in the US.”

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However, in Europe, the MiCAR regulation prohibits the payment of interest on stablecoin holdings by issuers and crypto asset service providers, while banks are requesting similar bans in the United States. In any case, at an aggregate level, retail deposit outflows would recover, at least partially, as wholesale deposits. This could occur directly, as stablecoin issuers keep some of their reserves as deposits in banks, or indirectly, through deposits made by the entities from which stablecoin issuers purchase their reserve assets. The critical issue here is that wholesale funding is often much less stable. Specifically, deposits made by stablecoin issuers may be subject to sudden withdrawals in the event of a “run” (panic) against the stablecoin, leaving banking funding structures more vulnerable to crises. Deposit concentration could also increase, as many banks could face retail fund outflows, while only a few would attract wholesale inflows.

REGULATORY ARBITRAGE
Global discrepancies between jurisdictions constitute the main source of risk of stablecoins for the euro area. Despite the many similarities between different legislative frameworks, significant differences persist regarding reserve requirements and whether redemption fees are allowed, for example. These differences facilitate regulatory arbitrage. Notably, risks can arise through multi-issuance in third countries, where an EU entity and one from a third country jointly issue a fungible stablecoin both in the EU and in a jurisdiction foreign to it. This could leave EU issuers with insufficient reserve assets under the supervision of EU authorities to meet the combined redemption requests of token holders inside and outside the Union, amplifying the risk of bank runs in the EU. Such risks require additional safeguards, imposing prerequisites that must be met before allowing access to the EU market.

Currently, the risks to financial stability posed by stablecoins are limited within the euro area, but their rapid growth justifies close monitoring, while the risks stemming from cross-border regulatory arbitrage must be addressed. Stablecoins are not widely used for transactions involving real-world assets, especially within the euro area, nor have they so far caused significant retail deposit outflows. Furthermore, US dollar-denominated stablecoins dominate the market, limiting their interconnections with the euro area financial markets through their reserve assets.

Even if stablecoins were adopted for a broader set of uses, and although interconnections with the euro area grew, the EU has implemented a strict regulatory framework through MiCAR that would mitigate potential risks.

Moreover, to mitigate the risks posed by cross-border regulatory arbitrage and reduce contagion risks from insufficiently regulated jurisdictions, it is vital that regulatory frameworks align even more globally. This can be achieved through the global implementation of the G20 roadmap for crypto assets, which includes the Financial Stability Board (FSB) recommendations on the regulation of crypto asset markets and activities, the Basel standard for banks' exposure to these assets, and the Financial Stability Board's recommendations for the regulation of global stablecoin arrangements.

MORE TRANSACTIONS THAN VISA

According to Binance's report 'The Stablecoin Business' - the world's largest cryptocurrency exchange, with 250 million users - the stablecoin market has recently surpassed $300 billion in capitalisation. And, more relevantly, these assets have ceased to be mere instruments for speculative trading to consolidate as the fundamental axis of the new digital economy, functioning as an “Internet payment layer.”

One of the most revealing data points is that, in 2024, stablecoins surpassed Visa's transaction volume, positioning themselves as the second most important medium of exchange in the world by daily volume. Currently, they register an average movement of $3.1 billion per day, a figure only surpassed by the US ACH system, which handles approximately $7.3 billion.

The corporate world is leading this transformation. Because while card payments often involve multiple intermediaries and fees - ranging from 1.5% to 4% - stablecoins offer a direct and cost-effective alternative for cross-border payments. According to data from Ernst & Young, 62% of companies already use stablecoins to pay international suppliers, while 53% use them to receive payments from abroad.

At a personal level, there is also a shift towards functional use. On platforms like Binance, only 12% of users use stablecoins exclusively for trading; in contrast, 88% use them for practical functions such as saving, transferring value, or generating yields through DeFi (Decentralized Finance), financial services like lending, exchanges, or insurance that operate on a blockchain network like Ethereum or Solana, where yield rates often exceed 5%. This trend reinforces their role as a tool for everyday financial management.

However, it is true that, despite the technological advancement of blockchain networks - which allow for immediate and programmable settlement - traditional networks like Visa and Mastercard retain the advantage of their enormous physical acceptance network. Thus, the current model tends towards a hybrid system where cards are linked to digital balances to facilitate the use of crypto assets in traditional commerce.

The study identifies three major axes that will define the evolution of the stablecoin market. The first is liquidity, a key challenge in an ecosystem still fragmented among multiple dollar-denominated stablecoins and different blockchains. This dispersion causes price differences and operational frictions. To resolve this, unified liquidity solutions and Open Issuance platforms are emerging, allowing stablecoins to be issued more openly and connected under a single infrastructure, with initiatives like Bridge (Stripe) aiming to simplify interoperability.

The second axis is regulation - as its 100% backing with liquid assets raises questions about the balance with the traditional banking system - and privacy: Platforms that issue or exchange stablecoins can no longer simply let someone open an account with an email address. They are now required to ask for ID, passport, or a facial scan. In addition to everything related to anti-money laundering. To reconcile both needs, solutions based on so-called zero-knowledge technologies (methods by which a person can prove to another - the verifier - that they know a specific piece of information, without revealing any information about that specific piece of information) and privacy models aimed at institutional use are emerging.

The third axis is linked to the integration between stablecoins, AI, and microtransactions, an area that is rapidly growing with standards like x402, which enables instant payments directly through the HTTP protocol. This can change the architecture of the Internet by allowing web pages, APIs, and AI agents to automatically pay for services, data, or computing power without the need for cards, banks, or intermediaries. According to the study, this advancement leads to an “agent economy,” where algorithms and autonomous systems interact with each other performing millions of digital transactions in real-time. Together, these three vectors point to a new financial paradigm based on blockchain infrastructure and stablecoins, which large tech companies and payment networks are already integrating.♦