Stablecoin Boom Requires Close Monitoring of Risks, ECB Says

The recent boom in stablecoins requires close monitoring, even if financial stability risks appear limited for now, the European Central Bank said.

“Stablecoins are growing rapidly and they may find adoption across new use cases, which could introduce financial-stability risks in the future,” it said Monday in a pre-release of its financial stability review, which is due Wednesday.

One risk identified in the report is that – if adopted widely – households could replace some of their bank deposits with stablecoin holdings – “diminishing an important source of funding for banks and leaving them with more volatile funding overall,” the ...