The European Central Bank (ECB) is expressing growing concern about the rapid expansion of US dollar-backed stablecoins, warning that a sudden market downturn could significantly impact financial stability in Europe. The ECB’s concerns stem from the potential for a ‘liquidity shock,’ where issuers of stablecoins would be forced to sell large amounts of U.S. Treasury bonds quickly, which could trigger wider market volatility and negatively affect credit conditions in Europe. The ECB highlights this concern during a time when the stablecoin market is exceeding $300 billion in value – with growth accelerating by 48% year-over-year due to looser regulations in the United States.