Central bank bigwigs are no longer studying interest rates—they're starting to study USDT?

The title sounds very academic: "Stablecoins and Monetary Policy Transmission." But in plain language, it’s:

“Help! If Europeans all start using USDT, our rate hikes and cuts will become meaningless!”

This all starts with how monetary policy is transmitted to ordinary people.

The normal scenario is: European Central Bank raises interest rates → commercial banks find borrowing more expensive → banks raise your loan interest rates → buying a house or car becomes pricier → you spend less → prices come down.

At the core of this chain is the commercial banks.

But here’s the problem: what happens if money starts leaving the banks?

You withdraw 10,000 euros from your bank account and exchange it for USDT. You think you’ve just changed wallets, the money is still there. But for the system, that money has already disappeared from the banking system.

The bank’s deposits decrease, so they have less to lend out.

It’s no big deal if one person does this. But what if tens of millions of Europeans do the same?

Bank deposits are drained, and to survive, banks can only borrow at high prices (called “wholesale financing,” which costs two or three times more than deposits). Then banks become more cautious, more expensive, and harder to get loans.

Businesses can’t get loans, individuals can’t afford homes, and the economic chain starts to stall.

At this point, if the ECB tries to raise interest rates to cool things down? Sorry, the transmission chain is already broken.

Even more interesting, the paper finds two “counterintuitive” phenomena:

1. Banks are afraid to lower deposit interest rates casually

In the past, when the central bank cut rates, banks followed suit, and users tolerated it. Now, with stablecoins as a “backup,” when banks cut rates, users immediately switch to USDT for better interest. To keep deposits, banks have to maintain high interest rates—meaning, when the ECB tries to accelerate, banks hit the brakes themselves.

2. The tightening effect is amplified and hard to predict

When the ECB raises rates, banks’ wholesale financing costs rise faster, and loan interest rates might jump more sharply than expected. The economy cools more than anticipated, causing unnecessary damage.

Simply put: the ECB presses the same button, but the effect varies in strength and direction, and it’s not always correct.

Monetary policy is like driving blindfolded.

But that’s not even the most unsettling part for the ECB.

The real issue is: the Federal Reserve is quietly infiltrating the Eurozone.

USDT is dollar-denominated, backed by US Treasuries on Tether’s books.

A German uses euros to buy USDT → money flows to Tether → Tether buys US government bonds → which is like that German lending money to the US government.

His money leaves the European banking system, leaves the euro, and enters the dollar system.

The ECB controls the euro, but Europeans are holding dollar stablecoins.

This dislocation is called “erosion of monetary sovereignty.”

In plain language: the Fed isn’t opening a branch in Europe, but through stablecoins, its influence has already seeped in.

The ECB also admits that it’s not there yet, but the key variable is scale.

Currently, the global stablecoin market cap is about $312 billion, more than doubling in the past three years. The ECB predicts it could reach $2 trillion by 2028.

By then, stablecoins could drain trillions of euros from the banking system, and the transmission coefficient α will spike sharply, making the traditional banking system vulnerable.

To conclude, here’s a translation of the last sentence of the paper:

“We can pretend we don’t see it now, but once we do, it will be too late.”

So next time someone claims stablecoins are just “payment tools,” show them this paper:

“Sorry, the European Central Bank is already worried about it.”