By the end of 2025, stablecoins in circulation had reached over USD 280 billion. The figure appears in the European Central Bank's Financial Stability Review published in November. The ECB's own data shows that around 99% of stablecoins in circulation are denominated in US dollars. Euro-denominated stablecoins amount to several hundred million euros.
This distribution mirrors the way money already moves outside digital finance, with the US dollar acting as the main lynchpin. Supply data quoted merely shows where scale has settled. In its 2026 Digital Assets Outlook, The Block places Tether's USDT at approximately USD 184 billion in circulation by the end of last year. Circle's USDC sits at around USD 75 billion. Other fiat-backed stablecoins exist, but they operate at a different order of magnitude as use follows supply. The same report notes that stablecoin settlement volumes were measured in the trillions of dollars during 2025.
International institutions have also begun to anchor expectations around that trajectory. In discussion papers published in 2025, the International Monetary Fund analysed rapid stablecoin growth and increasing use in payments and settlement, treating that expansion as occurring within the existing monetary order. These scenarios assume expansion within the existing monetary order, and this helps explain the shift in institutional behaviour over the past year. Stablecoins allowed institutions to leverage and operate more efficiently within the existing dollar-based system. Visa has confirmed publicly the use of USDC for settlement in the United States. PayPal expanded its own dollar stablecoin, PYUSD, and integrated it into its merchant ecosystem.
Banks have followed for similar reasons. Stablecoins are treated as settlement infrastructure. Transactions clear more quickly through the use of stablecoins, with balance reconciliation also occurring faster. Beyond execution speed, this allows cross-border payments to pass through fewer intermediaries.
Regulatory developments in the United States may also reduce much of the remaining hesitation. Circle's public listing in New York underlined how far this integration had progressed. The GENIUS Act, adopted in July 2025, established a federal framework for payment stablecoins, covering reserve backing, supervision and insolvency treatment. The real question will alwsys be what happens when a major issuer faces a run. The statutory framework exists; whether it holds under stress is another matter.
Europe took a different path. The Markets in Crypto-Assets Regulation (MiCAR) imposes authorisation, reserve and governance requirements on stablecoin issuers. Legal certainty may have improved, though this remains contested, but market share has not followed the same trajectory.
The reasons are structural and regulatory. The euro is not the primary currency used to invoice global trade, and commodity markets are not priced in euros. Nor does the euro area have a single, deeply liquid government bond that global markets rely on in the way they rely on US Treasuries. International use of the euro has declined since 2012, and sovereign debt concerns in Italy and France have not helped.
MiCAR adds its own constraints. Reserve requirements channel a material share of issuer deposits through credit institutions, embedding banking sector dependency into the business model. The threshold for systemic importance sits at USD 5 billion for stablecoins - a fraction of what would trigger equivalent scrutiny for a bank. Nearly 2,000 pages of technical standards accompany the framework. Whether this protects users or simply prices out competition depends on whom you ask.
The tone from European central banks has not helped either. Persistent scepticism toward stablecoin issuers, paired with active promotion of the digital euro, makes it harder to build institutional confidence in private issuance. Several major players have responded by focusing resources elsewhere.
Given the prevailing market, issuers face a practical question: what would they hold in ring-fenced reserves? German bunds at sub-2% yields, or Italian duration risk?
Although euro-denominated stablecoins did increase in number during 2025, the growth was marginal when set against dollar-denominated issuance. The euro does not play the same role in global trade and finance as the dollar, and stablecoins cannot escape that reality.
A euro-denominated stablecoin asks users to hold a currency rarely used to price global risk, sitting on top of a fragmented sovereign bond market. A dollar-denominated stablecoin offers the currency most global trade already runs on, backed by a single, deeply liquid government bond market that underpins financing worldwide.
This is where European debates often drift off course. Regulation can shape behaviour, improve safeguards, and set standards. It can also slow adoption or narrow use cases. What it cannot do is persuade global markets to switch the currency they use to price trade, manage risk and park liquidity. Those choices are made through habit, scale and trust, long before legislation enters the picture.
That is what makes 2026 their year. Stablecoins will not replace the existing system; they enhance how it runs, concentrating value where markets already price liquidity, safety and scale, while doing so more cheaply, faster and with less complexity. For most users, the change will be invisible, the same currencies, the same transactions, just faster and cheaper. For institutions, the focus shifts to value: improved margins, lower opportunity costs, and capital and liquidity freed from slow and inefficient settlement processes.
Article by Dr Ian Gauci
This article was first published in The Times of Malta of the 11 January 2026.
Photo credits: Times of Malta