Stablecoins at a Crossroads: The Riksbank's Assessment and Global Central Bank Response
Stablecoins could fundamentally reshape payments—but only if regulators resolve critical risks around financial stability, consumer protection, and monetary sovereignty. This is the core message from the Riksbank's November 2025 staff memo, which arrives at a pivotal moment: the stablecoin market has grown 68-fold in five years (from $4 billion in January 2020 to $272 billion in October 2025), regulatory frameworks are crystallizing globally, and central banks are grappling with how these private digital assets fit into the monetary system they oversee.
The Riksbank analysis, authored by Claire Ingram Bogusz, Björn Segendorff, Reimo Juks, and Gabriel Söderberg, provides one of the most comprehensive central bank assessments of stablecoins to date. It identifies genuine payment benefits while cataloging serious risks—and reveals important policy decisions the Riksbank and other central banks must make about stablecoin issuers' access to central bank infrastructure.
The Riksbank's core assessment balances optimism with caution
The staff memo acknowledges stablecoins' potential to improve payments while raising substantial concerns about what happens when things go wrong. Unlike volatile cryptocurrencies like Bitcoin, stablecoins are digital assets specifically designed to maintain a stable value relative to a reference currency—typically the US dollar. They differ from commercial bank deposits in three fundamental ways: they operate on distributed ledger technology accessible to anyone, they're backed by specific assets rather than fractional reserves, and they carry no deposit insurance protection.
Benefits the Riksbank identifies are concentrated in cross-border payments. Traditional international transfers remain expensive (averaging 6% in fees) and slow (1-5 business days through correspondent banking). Stablecoins on public blockchains can settle in seconds at a fraction of the cost. The memo notes that BVNK, one of the largest players, processes around $15 billion annually in cross-border stablecoin payments, with roughly half coming from business-to-business transactions—the largest segment for international payments.
For users in countries with high inflation and low confidence in monetary authorities, stablecoins offer accessible foreign currency holdings. The memo observes that stablecoins may also serve unbanked populations who find decentralized infrastructure easier to access than traditional banking. Additionally, stablecoins enable participation in decentralized finance (DeFi) and settlement of tokenized real-world assets—markets that remain small but are growing rapidly.
Six major risk categories dominate the Riksbank's concerns
Dollarization threatens monetary autonomy
The dominance of USD-denominated stablecoins—representing 99% of the $272 billion market—constitutes the Riksbank's foremost geopolitical concern. The US administration has explicitly declared promoting USD stablecoins a flagship policy, with Treasury Secretary Scott Bessent projecting the market could reach $3 trillion by 2030.
The Riksbank warns that "widely available stablecoins denominated in US dollars or other foreign currencies may accelerate dollarisation in countries that already experience some dollarisation." While countries with low inflation and strong fundamentals have not experienced dollarization historically, the memo notes that stablecoins enable new use cases unavailable with physical cash—e-commerce, digital payments, and DeFi participation—which could expand foreign currency adoption in unexpected ways.
The memo draws an explicit parallel to concerns about Visa and Mastercard dominance: if foreign actors control stablecoin issuance or infrastructure, strategic autonomy suffers. For Sweden specifically, the Riksbank notes that USD- or EUR-denominated stablecoins "might pose such a risk" to monetary sovereignty.
Fire sales and financial contagion
When stablecoin holders simultaneously seek redemptions, issuers must rapidly liquidate reserve assets—often short-term Treasury bills—to meet demand. The Riksbank warns this "can lead to abrupt price declines in these commonly held assets, affecting traditional financial institutions such as banks, mutual funds, and insurers that also hold them."
This concern has heightened as stablecoins become systemically relevant. The two largest issuers—Tether ($183 billion) and Circle ($77 billion)—hold reserves comparable to the world's largest money market funds. A run on either could trigger fire sales large enough to disrupt Treasury markets.
The risk amplifies through DeFi interconnections. If collateral values in DeFi protocols drop, automated liquidations trigger immediate asset sales, creating cascade effects. An October 2025 flash crash liquidated $19 billion in leveraged positions and caused one stablecoin, USDe, to lose its peg—illustrating these dynamics in action.
Bank disintermediation erodes funding stability
If retail depositors shift holdings from bank accounts to stablecoins, bank funding stability decreases. The Riksbank acknowledges banks could restore funding through market instruments, but these measures "are likely to lead to increased bank funding costs, potentially affecting bank lending rates."
The memo offers some reassurance: deposits retain advantages including deposit insurance, interest payments, established trust, and complementary services like credit. Stablecoins appear more likely to be used for specific payments rather than as primary accounts for receiving wages or revenue. Still, the risk warrants monitoring—Standard Chartered has warned that $1 trillion could drain from emerging market bank deposits by 2028 due to stablecoin adoption.
Consumer protection gaps and bailout risk
Stablecoins lack deposit guarantees. If an issuer cannot redeem at par, holders suffer losses. The Riksbank notes that if "a large number of retail users experience losses, governments can for political reasons be forced to provide compensation"—citing the 2008 Icesave case when UK and Dutch governments compensated citizens for Icelandic bank deposit losses.
The memo flags a particular confusion risk in Europe: under MiCA, banks can issue both deposits and stablecoins from the same legal entity. The UK has explicitly required banks to issue stablecoins through separate non-bank entities to prevent this conflation.
Singleness of money breaks down
Today's monetary system functions because different forms of money—cash, deposits, e-money—can be exchanged at face value without loss. This "singleness of money" relies on established conversion mechanisms. Stablecoins, as bearer instruments, create friction: receivers get whatever stablecoin the sender chooses, and "there are currently no easy and reliable channels for receivers to convert these stablecoins at par into the money they prefer."
The Riksbank invokes historical precedent: the Free Banking Era when cash notes from different banks traded at discounts. Without clearing and settlement solutions for stablecoins, similar fragmentation could emerge.
Illicit use and AML challenges
Because stablecoins can transfer peer-to-peer without issuer involvement, the issuer "only knows the identity of the holders at issuance and redemption, but not necessarily when payments are made between users." While issuers can freeze holdings and blacklist wallets, "the question of how effective these controls are to prevent illicit use remains debated."
How stablecoins compare technically to traditional payment infrastructure
Understanding why stablecoins matter requires comparing their architecture to existing payment rails:
| System | Settlement Time | Cost | Availability |
|---|---|---|---|
| SWIFT correspondent banking | 1-5 business days | ~6% average | Business hours |
| Card networks (Visa/MC) | T+1 to T+3 | 1-3% | 24/7 authorization; batch settlement |
| Instant payments (TIPS, FedNow) | Seconds | €0.002/tx (TIPS) | 24/7/365 |
| Stablecoins (Ethereum) | ~13 minutes (finality) | Variable gas fees | 24/7/365 |
| Stablecoins (Tron/Solana) | 3-13 seconds | Fractions of a cent | 24/7/365 |
Stablecoins' technical advantages include continuous operation without banking hours, programmability through smart contracts, reduced intermediaries, and direct peer-to-peer settlement. The Riksbank notes they achieve this by separating who issues the stablecoin, where transactions are logged (public blockchains), where holdings are custodied (wallets), and how redemption occurs—enabling specialization and innovation.
Technical limitations remain substantial. Layer 1 blockchains face throughput constraints—Ethereum processes roughly 12-15 transactions per second in practice versus Visa's 65,000 TPS peak capacity. Settlement finality varies: Ethereum requires approximately 13 minutes for economic finality (two epochs), while newer chains like Solana achieve practical finality in seconds. Cross-chain interoperability requires bridges that introduce security risks. And critically, blockchain transactions are irreversible—there's no chargeback mechanism for errors or fraud.
For cross-border payments specifically, stablecoins address the G20's goals of faster, cheaper international transfers. Current progress remains disappointing: the FSB reports it's "unlikely that satisfactory improvements at the global level will be achieved by 2027." Stablecoins bypass the correspondent banking chain entirely, eliminating pre-funding requirements and nostro/vostro accounts that tie up capital.
Central banks are converging on key concerns but diverging on solutions
The ECB prioritizes monetary sovereignty and digital euro development
ECB President Christine Lagarde has been unequivocal: stablecoins "risk undermining our capacity to conduct monetary policy" and "weakening the sovereignty of those countries." ECB adviser Jürgen Schaaf elaborated in a July 2025 blog post that "should US dollar stablecoins become widely used in the euro area—whether for payments, savings or settlement—the ECB's control over monetary conditions could be weakened."
The ECB has responded by accelerating the digital euro project and explicitly rejecting central bank reserve access for stablecoin issuers. A 2024 ECB statement explained that allowing stablecoins to hold central bank reserves "could blur the distinction between central bank money... and commercial bank money" and "risk conflating electronic money and other forms of money... in the mind of the public, thereby distorting perceptions of risk."
The ECB's April 2025 non-paper to the EU Council flagged multi-issuer stablecoins—tokens issued across jurisdictions with pooled reserves—as a critical vulnerability. If a global stablecoin like USDC is issued under both MiCA (EU) and US law, EU redemption requests might exceed EU-held reserves during a crisis.
The Federal Reserve is embracing stablecoins to extend dollar dominance
US policy underwent dramatic reversal in 2025. Federal Reserve Governor Christopher Waller called stablecoins "an important innovation" that could "maintain and extend the role of the dollar internationally." Governor Stephen Miran projected adoption reaching $1-3 trillion by decade's end and warned this "could create a multitrillion dollar elephant in the room for central bankers."
The Fed is considering "skinny master accounts"—direct access to payment rails without full banking privileges—for stablecoin issuers. At the October 2025 Payments Innovation Conference, Waller announced: "The DeFi industry is not viewed with suspicion or scorn. Rather, today, you are welcomed to the conversation on the future of payments."
The GENIUS Act, signed July 18, 2025, created America's first federal stablecoin framework. Key provisions include 1:1 reserve backing with qualifying assets, federal oversight for issuers exceeding $10 billion, bankruptcy priority for stablecoin holders, and explicit non-security status. Crucially, the Act prohibits interest payments to holders—a provision already creating tension as platforms like Coinbase offer "rewards" that Governor Waller criticized as "skirting the spirit of the law."
Other central banks chart varied approaches
Bank of England proposed requiring systemic stablecoin issuers to hold 40% of reserves in unremunerated Bank of England deposits, with the remainder in short-term government debt. Deputy Governor Sarah Breeden called the November 2025 consultation "a pivotal step towards implementing the UK's stablecoin regime."
Swiss National Bank is exploring "synthetic CBDC"—private tokenized currency backed by central bank funds—while emphasizing that for full par convertibility, issuers must hold sight deposits at the SNB with access to liquidity facilities.
Bank of Japan moved first with comprehensive regulation in June 2023, limiting stablecoin issuance to banks, fund transfer providers, and trust companies. Foreign stablecoins like USDT and USDC have no legal standing in Japanese regulated markets.
Monetary Authority of Singapore finalized its framework in August 2023, requiring 100% liquid reserve backing, monthly independent attestations, and timely redemption at par for "MAS-regulated stablecoins."
Central bank policy decisions hinge on three critical questions
Should stablecoin issuers access central bank settlement systems?
The Riksbank notes that different jurisdictions are taking different approaches. In the EU, stablecoin issuers qualifying as credit institutions or e-money institutions can participate in central bank settlement. But the ECB has decided not to allow these accounts for "safeguarding purposes"—only for payment settlement.
Access would enable instant purchases and redemptions, facilitate payments between stablecoins and bank accounts, and support monetary singleness. However, it requires adequate regulation and supervision to prevent undermining settlement system integrity.
Should central bank reserves serve as backing assets?
MiCA technically permits central bank reserves as backing, but the ECB and Riksbank have decided against allowing it. The Riksbank explains: "There is a concern that stablecoins backed only by central bank reserves could be marketed as extremely safe, accelerating adoption." Furthermore, such stablecoins "could undermine the efficiency and stability of the existing financial system built on fractional rather than full reserve banking."
The UK's original proposal required systemic stablecoins to be fully backed by central bank reserves to eliminate credit, liquidity, and maturity transformation risks entirely. However, this is now under revision to allow short-term Treasury securities, enabling issuers to earn returns on backing assets.
Should issuers access liquidity backstops?
The Bank of England proposed a liquidity facility for systemic stablecoin issuers, allowing them to monetize backing assets during stress to meet redemptions. This would effectively extend central bank support to private money issuers—a significant expansion of the safety net.
The Riksbank memo observes that while central banks have tools to reduce fire-sale risks, "these support measures must be adequately motivated and are typically only used to counteract system-wide risks that could undermine the functioning of the financial system."
Regulatory frameworks are crystallizing but gaps remain
EU's MiCA establishes the strictest requirements
MiCA, fully applicable since December 2024, classifies stablecoins as E-Money Tokens (single-currency pegged) or Asset-Referenced Tokens (basket-backed). Key requirements include full reserve backing, free and immediate par-value redemption, and a prohibition on paying interest. Algorithmic stablecoins are effectively banned.
Implementation has reshaped the European market. Tether did not pursue MiCA authorization; USDT was delisted from major EU exchanges by March 2025. Circle obtained a French e-money license, positioning USDC and its euro-denominated EURC as the primary compliant options.
The Riksbank notes a consortium of European banks including SEB and Danske Bank announced plans to launch a joint euro stablecoin under MiCA—recognition that regulated European alternatives must emerge.
US GENIUS Act prioritizes dollar expansion
The GENIUS Act reflects explicit policy goals: Treasury Secretary Bessent declared stablecoins will "buttress the dollar's status as the global reserve currency." The law permits broader reserve asset categories than MiCA, including government money market funds and certain repos.
A key difference: GENIUS allows state regulation for issuers below $10 billion in outstanding stablecoins, creating a dual federal-state framework. This state pathway has drawn ECB criticism for potentially enabling regulatory arbitrage.
Multi-issuer stablecoins create cross-border complications
Circle's USDC exemplifies the challenge: it's issued under both US law and MiCA compliance through separate legal entities. The Riksbank memo explains these "multi-issue stablecoins" are fungible and indistinguishable, but stablecoins issued in third countries may be "redeemable in the EU but not covered by backing assets in the EU."
The European Systemic Risk Board issued a September 2025 recommendation urging the EU to either interpret MiCA as prohibiting multi-issue arrangements or create stricter controls. The ECB warned that during a run, "investors would naturally prefer to redeem in the jurisdiction with the strongest safeguards, which is likely to be the EU... But the reserves held in the EU may not be sufficient."
FSB peer review finds implementation "incomplete, uneven and inconsistent"
The Financial Stability Board's October 2025 thematic review evaluated implementation across 28 member jurisdictions. Only five jurisdictions had finalized stablecoin frameworks; eleven had completed broader crypto-asset rules. The review found "significant gaps and inconsistencies" creating regulatory arbitrage opportunities.
Stablecoins and CBDCs: Competition or coexistence?
The Riksbank positions e-krona discussions in a new context
The staff memo does not extensively discuss Sweden's e-krona project, but the ECB context is instructive. The ECB has accelerated digital euro development explicitly in response to stablecoin growth. Executive Board member Piero Cipollone stated a digital euro "would limit the potential for foreign currency stablecoins to become a common medium of exchange within the euro area."
The Riksbank has decided to transition to Eurosystem platforms for settlement services and is exploring instant cross-currency payments between Swedish krona, Danish kroner, and euro via TIPS. These developments suggest Sweden may rely on European infrastructure rather than developing standalone e-krona solutions.
Different forms of money will likely coexist
The Riksbank memo acknowledges stablecoins could serve different needs than CBDCs. Stablecoins excel in programmability, DeFi integration, and cross-border applications. CBDCs offer central bank backing and direct monetary policy transmission. Bank-issued tokenized deposits provide familiar credit relationships with blockchain settlement.
The BIS has advocated a "unified ledger" vision where multiple forms of tokenized money interoperate. The Riksbank notes the ECB is developing Pontes and Project Appia to facilitate safe settlement in central bank money when tokenized assets mature—ensuring stablecoins don't crowd out central bank settlement.
Market dynamics are reshaping competitive landscapes
The stablecoin market has concentrated remarkably: Tether ($183 billion) and Circle ($77 billion) control 94% of issuance. But this dominance faces challenges.
Tether operates without major regulatory approval. S&P downgraded its stablecoin assessment to "weak" in November 2025, citing high-risk assets (24% of reserves including Bitcoin and gold), limited transparency on custodians, and Bitcoin exposure exceeding its overcollateralization buffer. Despite this, Tether reported $10 billion profit in the first nine months of 2025.
Circle positioned for regulated markets through its IPO. Filed in April 2025 with JPMorgan and Citigroup as underwriters, Circle aims for NYSE listing with a $5-6.7 billion valuation. Its MiCA compliance gives it effective European market exclusivity among major issuers.
PayPal's PYUSD demonstrated explosive growth—market cap surging from $1.2 billion to $3.8 billion in 90 days (+216%). The Riksbank notes that platforms offering "rewards" on stablecoin holdings raise concerns about disintermediation, particularly since PYUSD offers 3.7% annual yield despite GENIUS Act restrictions on issuer-paid interest.
Banks are preparing joint stablecoin initiatives. Nine European banks including SEB announced plans for a euro stablecoin; nine Wall Street banks including Goldman Sachs, Deutsche Bank, and Citigroup disclosed discussions for jointly-backed dollar stablecoins. JPMorgan already operates substantial stablecoin-like infrastructure through its Kinexys platform.
The path forward requires international cooperation
The Riksbank concludes that stablecoins' "global nature means that no single country can monitor—or enforce action against—them." The FSB's high-level recommendations provide a starting framework, but implementation remains inconsistent. The memo calls for "strong international cooperation" to address:
- Cross-border enforcement against offshore stablecoin issuers serving regulated jurisdictions
- Reserve management standards that prevent fire-sale contagion across borders
- Consumer protection harmonization so users face consistent safeguards regardless of jurisdiction
- Singleness solutions enabling stablecoins to integrate with existing monetary systems
The Riksbank's assessment ultimately strikes a measured tone: stablecoins hold genuine promise to improve payments, particularly across borders. But that promise "must not come at the expense of financial stability, consumer protection and trust in money." Resolving this tension—capturing benefits while managing risks—will define central bank policy toward private digital money for years to come.
Conclusion: A watershed moment for digital money policy
The Riksbank staff memo arrives at a watershed moment. Major jurisdictions have implemented comprehensive frameworks (MiCA, GENIUS Act). Central banks have articulated competing visions—from the ECB's defensive posture protecting euro sovereignty to the Fed's embrace of dollar-extending stablecoins. The market itself has matured from crypto-trading infrastructure to nascent cross-border payment rails processing hundreds of billions annually.
Three critical uncertainties will shape stablecoins' trajectory:
First, whether US regulatory support translates into sustained dollar-denominated dominance—or whether European, Asian, and emerging-market alternatives gain traction. The Riksbank's concern about strategic autonomy suggests Sweden and Europe will actively work to develop alternatives.
Second, whether fire-sale risks materialize during the next financial stress. Tether and Circle now hold reserves comparable to major money market funds; a run could propagate through Treasury markets in ways without precedent.
Third, whether central banks' policy decisions on settlement access and reserve backing create genuine monetary singleness for stablecoins—or leave them as a parallel system with persistent friction against traditional money.
The Riksbank has made its initial choices: no central bank reserves for backing, careful monitoring of dollarization risks, and reliance on European infrastructure like TIPS for instant cross-currency payments. But as the memo acknowledges, stablecoins' "borderlessness and interconnections" mean these domestic decisions must ultimately align with global frameworks that remain incomplete.