“Private crypto assets do not currently pose a threat to the established monetary system. Monetary policymakers and financial regulators are viewing the growing market for stablecoins with increasing interest. At the most recent general meeting of the Bank for International Settlements (BIS)—the "bank for central banks"—several presentations and panel discussions focused on this topic.
A stablecoin is a privately issued digital crypto-asset (or "token") whose value is typically backed—though exceptions exist—by assets of value held by the issuer.
Stablecoins are stored in digital wallets. Most users keep them in their own wallets, while a minority have them held in custody by a provider in a customer account.
Of the approximately $320 billion total market value of all stablecoins, 99.6 percent is accounted for by dollar-based products. Euro-stablecoins contribute 0.2 percent to the market value, with the remainder distributed among other currencies.
The stablecoin’s promise of stability relative to a reference value distinguishes it from crypto-assets like Bitcoin.
The two largest stablecoins are USDT, issued by Tether, with a market value of around $190 billion, and USDC, issued by Circle, which has a market value of $80 billion.
Circle is based in the United States; Tether originated in the United States, though its parent company is now domiciled in El Salvador. The backing for both non-interest-bearing stablecoins consists primarily of short-term US government securities. "USDT and USDC are essentially tokenized claims on portfolios of short-term US Treasury securities: each token is issued at par value against Treasury bills as collateral, and the issuer holds the underlying Treasury bills until maturity," write a team of authors led by economist Eswar S. Prasad (Cornell). University).
The euro remains insignificant as an issuance currency for stablecoins to date. More than half of the modest market capitalization—totaling around 600 million euros—is accounted for by the EURC product from the US issuer Circle. The EURAU stablecoin, launched by German issuers in the summer of 2025 and backed by bank deposits and bonds, has so far reached a volume of just over one million euros. Qivalis—a project supported by 37 European banks, including DZ Bank—has announced its market entry for the second half of 2026.
The global stablecoin market capitalization, dominated by the dollar, has grown sharply in recent years, though momentum has slowed in recent months. The same applies to trading volume: while Visa recorded USDC trading turnover of 1.8 trillion dollars in June 2026—an increase of 125 percent compared to the same month the previous year—the figure for the first half of 2026 as a whole shows a decline relative to the prior-year period. Turnover in USDC (Circle) is traditionally higher than in USDT (Tether), even though the Tether stablecoin boasts a market capitalization more than twice as large.
The market warrants attention and analysis; however, it does not yet appear to pose a serious challenge to the established monetary system. Economist Gita Gopinath (Harvard University) emphasized in a lecture on the sidelines of the BIS General Meeting that the market capitalization of just over 300 billion dollars represents less than one percent of the dollar money supply. The dollar money supply currently stands at around 36 trillion dollars, comprising 19.1 trillion dollars in bank deposits held in US accounts and 14.5 trillion dollars bank deposits in accounts outside the United States and $2.5 trillion in banknotes and coins.
Amid concerns about the United States’ ever-growing influence driven by the dollar’s dominance, a debate has emerged regarding the risk of Europe falling behind. Continued reliance on American payment infrastructures allows the United States to export standards, dependencies, and potentially its own currency, Christoph Burger and Joachim Wuermeling wrote in the *F.A.Z.* about three months ago. They continued on a somber note: "The geopolitical dimension is equally sobering. Stablecoins denominated in foreign currencies can jeopardize monetary sovereignty. After all, if a domestic currency is displaced, the central bank loses its ability to steer the economy. A similar logic applies to businesses. Companies that pay for purchases, wages, and taxes in euros also require digital liquidity in euros—to avoid exchange rate risks, complexity, and uncertainty."
Given the current significance of the stablecoin market, these fears appear just as exaggerated as the notion that with Donald Trump stablecoins create yet another major market for US government securities. Concerns raised by commercial banks—that the use of stablecoins in international payments would cause their profit margins in this sector to melt away like a snowball in summer—are also open to question.
Economists also raise questions regarding the uniformity of money in the context of stablecoins. The value relationship between cash and bank deposits within a given currency is traditionally constant. But can one rely on a constant value relationship between stablecoins and cash or bank deposits? Frank Smets, Chief Economist at the BIS, expressed skepticism in an interview with the *F.A.Z.*: "With stablecoins, this is not always guaranteed; their prices can fluctuate, thereby failing to meet the condition of monetary uniformity" (*F.A.Z.*, June 28, 2026). Furthermore, there are legal and regulatory issues—for instance, regarding money laundering, terrorist financing, and other illicit activities. The value of a stablecoin depends on the issuer's reserve assets, its redemption pledge, the legal structure, and market confidence, Bundesbank President Joachim Nagel noted in mid-June at an event in Eltville.
From a European perspective, it is certainly worth asking why the euro appears to be lagging hopelessly behind the dollar in the stablecoin market.
One clue points to a typically European practice—one adopted by other nations like Japan: the market was regulated before it could even emerge.
European regulation (MiCA) was considered exemplary by regulators, according to Shin Hyun-song—Governor of the Bank of Korea and a highly respected financial economist—speaking at a BIS event. However, Shin continued, the regulations devised in Europe and Asia resembled a comfortable, beautifully lit, and well-air-conditioned house—yet hardly anyone wanted to live in it. This is because US regulations remain looser by comparison, and the market leader, Tether, faces even less regulation in El Salvador. Nevertheless, the business is conducted in dollars. "Why haven't stablecoins denominated in currencies other than the dollar gained traction, despite very favorable regulatory frameworks?" Shin asked.
Citing a new study by the Federal Reserve Bank of Kansas, he offered an answer: It appears there is greater international demand than previously thought for dollar-denominated stablecoins as an anonymous, non-interest-bearing store of value—much like cash. Banknotes, particularly those of higher denominations, have long been popular as a store of value in many countries. Stablecoins appear to be emerging as a competitor to dollar banknotes, a significant portion of which circulate outside the United States.
Based on recent research, Gopinath also identified the desire for anonymity as a key driver of demand for stablecoins. Michelle Bullock, Governor of the Reserve Bank of Australia, acknowledged that such demand certainly exists, but noted that it is not a mass phenomenon. In Australia, three authorized stablecoins have a combined market capitalization of 10 million Australian dollars—a negligible amount compared to the roughly 100 billion Australian dollars in cash circulation.
The study by the Federal Reserve Bank of Kansas indicates that the importance of stablecoins as a means of payment for transactions has been overestimated so far. Nevertheless, banks are preparing for them to play an increasingly important role. "As regulation, market infrastructure, and institutional investor participation continue to evolve, stablecoins are increasingly being considered in the context of payment systems, cash management, tokenized assets, and cross-border financial flows," notes Standard Chartered Bank. However, according to an analysis presented by economist Wenxin Du (Harvard Business School) at a BIS conference, stablecoins do not currently offer a "silver bullet for cross-border payments" in terms of cost and efficiency.
Years ago, Shin compared the creation of stablecoins in our time to the creation of scriptural money by the Bank of Amsterdam in the 17th century. At that time, the bank issued deposits backed by gold and silver, which facilitated simpler payment transactions. The Bank of Amsterdam—a private institution back then—operated successfully until it violated its own rules and extended excessive credit to questionable borrowers.
In a paper co-authored with Rodney Garratt a few years ago, Shin argued that the future of the monetary system lies not in a return to unregulated private money issuance—as seen during the era of the Bank of Amsterdam—but rather in should consist of the tokenization of money within the proven two-tier banking system comprising a (usually state-run) central bank and commercial banks. In Project Hangang—which he presented at the recent European Central Bank forum in Sintra—he, as Governor of the Bank of Korea, is testing a digital world where tokens representing central bank money, commercial bank money, and securities can interact on a single platform.” [1]
1. Von null auf 320 Milliarden Dollar: Der Markt für Stablecoins ist in den vergangenen Jahren kräftig gewachsen. Eine Gefahr für das etablierte Geldsystem sind die privaten Kryptowerte derzeit nicht. Frankfurter Allgemeine Zeitung; Frankfurt. 17 July 2026: 19. Von Gerald Braunberger, Frankfurt
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