Could stablecoins trigger the next financial crisis? Eight risks you need to know

The first post in this series explained how the current US administration is using stablecoins as a geopolitical instrument, deliberately promoting dollar-backed private money to extend dollar dominance worldwide. Three economists writing for the European Parliament’s ECON Committee aptly named this strategy cryptomercantilism. The second post showed how that strategy is already producing measurable effects in Europe, with dollar stablecoins accounting for an estimated 38% of global stablecoin transaction flows in the final quarter of 2025 and euro-denominated alternatives representing a mere 0.3% of total supply, a pattern consistent with what Bruegel researchers call “infrastructure dollarisation”.

Both posts, however, set aside a question that deserves its own treatment: irrespective of geopolitics, what are the concrete financial risks that stablecoins pose in themselves? Not just to European monetary sovereignty, but to the stability of the global financial system?

The June 2025 report prepared for the EU Parliament by Jens van ‘t Klooster, Edoardo Martino, and Eric Monnet identifies eight distinct risks. They fall into two categories: four stem from the internal mechanics of how stablecoins work (their rules on redemption, conversion, and asset-backing); the other four emerge specifically from the fact that stablecoins circulate across borders in currencies that are foreign to the users holding them. This post works through all eight, drawing on the source material.

Why the structure of stablecoins matters

Before examining the risks, it helps to recall what a stablecoin actually is in financial terms. Unlike a bank deposit, which benefits from deposit insurance and ultimately from state backing, a stablecoin is pure private money. Its stability rests entirely on its issuer’s commitment to maintain a 1-to-1 redemption against a widely accepted currency and to hold sufficiently liquid assets to honour that commitment.

That commitment, as the EU Parliament report observes, is “not safeguarded in the same way” across jurisdictions. Tether, for example, only offers direct redemption for sums starting at USD 100,000. Everyone else must convert via third-party exchanges, introducing the kind of friction that, under stress, can become a one-way door. The IMF’s 2025 study on stablecoins confirms that major issuers “do not provide redemption rights to all holders and under all circumstances”, which creates first-mover advantages that are structurally indistinguishable from classic bank-run dynamics.

With that foundation in mind, here are the eight risks.

The first four: Risks from redemption mechanics

Risk 1: Runs on stablecoins

The most immediate risk is a run, and it does not require the stablecoin to be poorly backed.

Even when stablecoin reserves consist entirely of ostensibly safe assets, the EU Parliament paper notes that there can be a “mismatch between the liquidity and maturity of assets and liabilities”. In plain terms, the assets held by the issuer may not be liquid enough to satisfy a wave of simultaneous redemption requests. When confidence falters, stablecoins can de-peg from their reference currency. This is not an unfortunate accident but a structural feature. As the report puts it, “de-pegging events can happen swiftly, akin to currency crises, especially if a shock reduces the value of the stablecoin’s asset base”.

There is historical precedent. The March 2020 crisis in US money market funds (MMFs) showed exactly this dynamic: a sudden surge in redemption requests, fire sales of underlying assets, and ultimately a Federal Reserve intervention to stabilise markets. Stablecoins replicate the economic structure of MMFs, but as the paper notes they do so at a larger scale, given that stablecoins do not pay interest. The absence of a yield return removes one of the key stabilising incentives for holders to stay put during turbulence.

Tether has already de-pegged from its dollar target during periods of market stress, as documented by Eichengreen and co-authors in 2025. The US GENIUS Act, whose regulatory implications were covered in the first post of this series, makes matters more acute by permitting stablecoins to be used as collateral. This is a feature that creates leverage and amplifies the scale of any potential deleveraging event.

Risk 2: Market liquidity shocks from portfolio shifts

Stablecoin issuers are private companies with profit motives. Like MMFs before them, they are incentivised to search for yield while formally maintaining asset liquidity. This creates a structural tendency toward abrupt portfolio reallocations in response to interest rate differentials across jurisdictions.

The EU Parliament report gives a concrete example: a euro-denominated stablecoin issuer might shift holdings from eurozone sovereign debt into US Treasury bills when US interest rates rise. Banks face similar pressures, but the effect is less pronounced because their asset portfolios are dominated by loans, which are inherently sticky. Stablecoin issuers have no such anchor. Their entire asset base is, by design, short-duration and liquid, which means it can be moved quickly.

At scale, such shifts “could affect Eurozone bond markets, potentially forcing the ECB to follow the Fed’s monetary stance or to intervene on the short-term debt market”. The IMF’s analysis adds that stablecoins already hold approximately 2% of outstanding US Treasury bills, and preliminary estimates suggest that a USD 3.5 billion increase in stablecoin issuance matched with increased T-bill demand reduces yields by around 2 basis points. The concern is not the current scale. It is what happens as the market grows toward the USD 1.9 trillion that Citibank has estimated as a plausible capitalisation by 2030.

Risk 3: Bank liquidity risks

Stablecoin issuers do not keep all their reserves in government securities. A significant share sits in commercial bank deposits, and this is where the third risk materialises.

When stablecoin issuers withdraw from bank deposits in pursuit of higher yields, they can strain bank liquidity in ways that are difficult for regulators to monitor in real time. The EU Parliament report draws a striking historical parallel: the notorious 19th-century US pyramidal banking system, where city banks held reserves for country banks, and sudden reserve withdrawals triggered systemic crises across the entire network. The Federal Reserve was itself created in part to counteract precisely this kind of destabilisation by providing emergency liquidity.

MiCAR attempts to address this by requiring stablecoin issuers to keep at least 30% of reserves in bank deposits at all times, rising to 60% for significant issuers. But this requirement has its own paradox. The May 2026 Bruegel Policy Brief on tokenised finance argues that forcing such a high proportion into bank deposits has no prudential justification and instead functions as a structural handicap that makes EU-regulated euro stablecoins commercially unviable at scale, while doing nothing to prevent equivalent risks from dollar stablecoin issuers operating outside MiCAR’s perimeter.

Risk 4: Bank runs

The fourth risk runs in the opposite direction. Rather than stablecoin issuers pulling money out of banks, it involves depositors moving their savings into stablecoins during a banking crisis and, in doing so, triggering or amplifying a bank run in the process.

The EU Parliament report frames this as a modern version of the banking crises of the 1930s, when deposits flowed from unregulated commercial banks to government-backed savings institutions. The structural logic is identical: in a crisis, depositors flee to what they perceive as the safer or more liquid instrument. Under MiCAR, stablecoins are not permitted to pay interest, which limits their attractiveness in normal times. But in a crisis, yield is not the point. The point is exit.

The 2023 US banking turmoil offers a preview. During the collapse of Silicon Valley Bank, there was a sudden and substantial shift of deposits into money market funds. Circle, whose USDC stablecoin had approximately USD 3.3 billion of its reserves held at SVB, temporarily lost its dollar peg and dropped to around USD 0.88 before the Federal Deposit Insurance Corporation guaranteed all SVB deposits. That episode illustrated simultaneously the bank run risk that stablecoins can trigger and the contagion risk they are themselves exposed to. Both directions were live at the same time.

The second four: Risks from cross-border circulation

The first four risks apply anywhere stablecoins operate, including within the US itself. The following four are specific to the international use of stablecoins and are, arguably, the more consequential ones for the EU and for the global monetary system.

Risk 5: Exchange rate risk

When EU citizens or businesses hold and transact in dollar-pegged stablecoins, they take on direct foreign exchange exposure. If the dollar depreciates against the euro, the euro-converted value of those holdings falls. The EU Parliament report describes this as potentially “leading to losses or increased volatility in their purchasing power” for European stablecoin users. This is not a scenario of dramatic collapse but a persistent and diffuse drag on the real economy.

What is less obvious is the aggregate effect. At current adoption levels, this risk is modest. But as corporate use of stablecoins grows, especially for cross-border trade and payroll, the volume of unhedged dollar exposure held by European companies in stablecoin wallets could become economically significant. Unlike traditional foreign currency positions, which are tracked and hedged by corporate treasury functions, stablecoin holdings may accumulate informally and outside normal treasury management frameworks, precisely because they feel more like “cash” than like foreign currency assets.

Risk 6: Dollarisation and loss of monetary autonomy

This is the risk at the heart of the second post in this series, and it deserves revisiting here in more explicit terms. If dollar-pegged stablecoins circulate widely within an economy, the central bank’s ability to conduct independent monetary policy is progressively undermined.

The mechanism is straightforward. Monetary policy operates primarily through its effects on the interest rate and credit conditions facing households and firms. If a growing share of economic activity is settled not in euros but in dollar-denominated stablecoins, the ECB’s rate decisions become less relevant to those transactions. The rate on euro reserves has no direct bearing on a payment settled in USDT. Over time, as the report puts it, this can “pressure the central bank to peg its currency to the dollar or set its monetary policy with a close eye to the dollar, without a formal peg”. This is what Calvo (2002) identified as the central problem of dollarisation: the loss of the exchange rate as a macroeconomic adjustment mechanism, without any corresponding formal agreement or democratic accountability.

Crucially, this does not require most Europeans to hold stablecoins. It requires only that enough high-value transactions, such as corporate payments, cross-border trade, and financial market settlement, migrate into dollar-denominated instruments for the ECB’s control over aggregate monetary conditions to weaken at the margin.

Risk 7: Erosion of the Euro’s international role

The international standing of a currency is closely tied to its role in trade invoicing. The EU Parliament report observes that “replacing euro-denominated transactions with stablecoin-based payments pegged to the dollar could reduce the euro’s attractiveness as a reserve asset”. This is not a novel concern, given that the euro was conceived in part to reduce European dependence on the dollar, but stablecoins represent a new and more insidious vector.

The IMF paper notes that “US dollar-denominated stablecoins could reinforce the global dominance of the dollar” and that network effects, meaning the fact that the value of a means of payment increases as more people use it, make this a self-reinforcing process. Once dollar stablecoins become the default settlement asset in tokenised capital markets, which is what the Bruegel paper warns is already beginning to happen, euro-denominated alternatives face a network disadvantage that is very hard to overcome through regulation alone.

The numbers make this concrete. The euro currently accounts for 20% of global reserve assets, against 58% for the dollar. Euro-denominated stablecoins represent 0.3% of total stablecoin supply. Donald Trump’s personal USD1 stablecoin, launched in 2025, is alone valued at more than the entire euro stablecoin market combined. These are not abstract ratios. They represent the starting position from which Europe would need to defend its monetary standing.

Risk 8: Destabilisation of cross-border payments and AML risks

The eighth risk is the most diffuse but, in some ways, the most immediate: the use of non-EU-licensed stablecoins in countries that border or trade closely with the EU creates spillovers that MiCAR cannot contain.

The EU Parliament report identifies two distinct mechanisms. The first is financial: if EU households and companies use unregulated foreign stablecoins, whether because EU-regulated alternatives are unavailable or because they access non-EU exchanges through self-hosted wallets, they are exposed to the exchange rate and financial stability risks of those instruments entirely outside any supervisory protection.

The second is a criminal compliance risk flagged in a dedicated box on anti-money laundering. The FATF Travel Rule, which requires sender and recipient information to accompany cross-border crypto asset transfers, is implemented in the EU through the Transfer of Funds Regulation with no de minimis threshold. But its effectiveness depends entirely on transactions flowing through regulated intermediaries. Peer-to-peer transactions through self-hosted wallets fall entirely outside its reach. As the report notes, criminals can move significant value in stablecoins across borders quickly and bypass detection and regulatory safeguards by exploiting gaps in regimes across jurisdictions.

The IMF goes further, noting that stablecoin anonymity tools such as mixers and cross-chain bridges can be used to “obfuscate the source, ownership, and destination of funds”, and that some jurisdictions have already observed a shift from unbacked crypto assets to stablecoins for on-chain illicit activity, including for terrorism financing and sanctions evasion. The speed and near-irreversibility of blockchain transactions compounds the challenge for law enforcement.

How the regulatory frameworks shape these risks

It would be a mistake to treat these eight risks as uniform threats. Their severity depends critically on the legal environment in which stablecoins operate, and the gap between MiCAR and the US GENIUS Act is, in several respects, wide.

The EU Parliament report identifies the key divergence on the first four risks: MiCAR requires stablecoin issuers to develop recovery plans including liquidity fees, redemption gates, and suspension mechanisms, giving regulators tools to manage a run before it becomes systemic. The GENIUS Act, by contrast, does not include crisis management requirements for issuers. It focuses instead on bankruptcy treatment, granting stablecoins priority over other creditors in insolvency proceedings. This is a measure that protects holders after a collapse but does nothing to prevent one.

On capital requirements, the difference is starker. MiCAR mandates 2% own funds in Common Equity Tier 1 for standard issuers, rising to 3% for significant ones, with the possibility of a 40% prudential add-on. The GENIUS Act leaves the determination of capital requirements to the discretion of the primary regulator, subject only to the condition of “not exceeding what is sufficient to ensure ongoing operations”. This is a standard that, in practice, is likely to be lower than MiCAR’s fixed minima, especially in a regulatory environment prioritising crypto innovation.

For the second group of risks, the regulatory divergence is more about extraterritorial reach. The EU Parliament paper is clear that MiCAR’s protective perimeter, however carefully constructed, has structural weaknesses: the transaction caps apply only to CASP-intermediated flows, the reverse solicitation exemption provides a functional backdoor for non-compliant coins, and the regulation was not designed to govern the settlement architecture of tokenised capital markets.

The assessment: Which risks are most acute right now?

The EU Parliament report is measured in its conclusions. It does not argue that all eight risks are equally imminent. For the EU specifically, its assessment is that stablecoins currently pose limited stability risks due to low household adoption and MiCAR’s protective architecture. The real danger is concentrated in two areas.

The first is corporate adoption. If euro-area companies begin using stablecoins at scale, particularly for cross-border payments where the efficiency gains are most compelling and the preference for dollar instruments most entrenched, the liquidity and dollarisation risks escalate rapidly. Companies currently hold EUR 2,450 billion in overnight bank deposits in the eurozone. Even a modest migration into dollar stablecoins would be macroeconomically significant.

The second is global expansion. Citibank estimates that stablecoin capitalisation could grow from USD 250 billion to USD 2 trillion between 2025 and 2030, driven principally by demand in emerging markets: regions where financial inclusion is low, currencies are unstable, and dollar-denominated instruments have a long history of adoption. As the EU Parliament report notes, “dollar-pegged stablecoins may be highly attractive to citizens of countries with low levels of financial inclusion and unstable currencies”. The EU would then face “an even stronger international role of the US dollar, hindering key EU interests in trade and stable multilateral relations”. These are not European problems today. They are European problems in five years.

The bigger picture

What connects all eight risks is a single structural feature of stablecoins: they are private money, issued without the state backing that makes bank deposits safe and central bank money universally accepted. The rules on redemption, asset quality, capital, and crisis management that regulators have built up over decades for banks, rules stress-tested brutally in 2008 and 2023, have not yet been fully applied to stablecoins. And where they have been applied, as in MiCAR, issuers operating under the less regulated US regime gain a structural competitive advantage.

This does not mean a financial crisis is imminent. It means the conditions for one are being assembled, piece by piece, in a part of the financial system that most people are not yet watching closely.

The first post in this series argued that the US stablecoin strategy is a form of economic statecraft. The second post argued that its effects are already visible in European payment data. This post has tried to show that the underlying financial risks are real and well-documented: not alarmist projections, but identified, named, and numbered concerns from the IMF, the European Parliament, Bruegel, and the ESRB.

The question for European policymakers is not whether these risks exist. It is whether MiCAR as currently calibrated, and the broader absence of a proactive euro stablecoin strategy, constitutes an adequate response to all eight of them simultaneously.

This post draws primarily on the June 2025 study “Cryptomercantilism vs. Monetary Sovereignty” prepared for the EU Parliament’s ECON Committee by Jens van ‘t Klooster, Edoardo Martino, and Eric Monnet; the IMF’s 2025 Departmental Paper “Understanding Stablecoins”; and Bruegel’s May 2026 Policy Brief “The Threat from Tokenisation to the European Financial System”.