The United States’ geopolitical brinkmanship over Greenland has thrown its economic ties to the EU into sharp relief. European powers are considering what instruments it has to combat US belligerence, including the “nuclear option” of offloading US debt.

The tone has shifted after a supposed “framework of a deal” at Davos, and US ambitions to take over Greenland have cooled, for now. But EU heads of state are still preparing possible responses to further escalation.

One option was cutting off access to US markets through the so-called “trade bazooka.” If triggered, it would cut off US companies from the EU market, costing them billions. Another option is offloading the trillions of dollars in US assets held in Europe.

But questions remain regarding its feasibility, as dumping could drastically change the global economic landscape. It could also have knock-on effects for the US financial system’s exposure to stablecoins.

Can the EU actually dump US debt?

Prior to Jan. 21, European leaders were considering possible responses. While Denmark deployed special forces to Greenland, other heads of state suggested the trade bazooka, which would deny the US access to EU markets.

Others, including former Dutch Defense Minister Dick Berlijn, suggested that Europe could use US debt as leverage. Berlijn said, “If Europe decides to offload those bonds, it creates a big problem in the US. [The dollar] crashes, high inflation. The US voter won’t like that.”

George Saravelos, Deutsche Bank’s chief FX strategist, wrote in a note last weekend, “For all its military and economic strength, the US has one key weakness: it relies on others to pay its bills via large external deficits.”

“That [stablecoin issuers] are growing as fast as they are means that their need for Treasurys is correspondingly high. To the extent that this trend continues, it offers a great advantage for US policymakers, but it also deepens the link between the continuity of stablecoin issuers and that of the ability of US Treasury markets to continue remaining liquid and popular,” said Yadav.

Related: Senate passes GENIUS stablecoin bill amid concerns over systemic risk

The proliferation of stablecoin issuers as a buyer for US debt doesn’t come without its risks. This, combined with fewer buyers of US debt, particularly in the event of the EU dumping or even significantly decreasing its exposure, could spell trouble for US Treasury markets.

Yadav and Brendan Malone, who formerly worked in payments and clearing at the Federal Reserve Board, have previously noted liquidity shocks in US debt markets, both in March 2020 and April 2025.

In the event of a run on stablecoin issuers, this lack of liquidity and growing lack of counterparties to sell to could prevent the issuer from selling off its securities. It would become insolvent and also significantly impact the credibility of US Treasury markets.

Economic and military escalation in an increasingly multi-polar world has created rifts between former allies. While there is hope for a dialogue between the EU and US, Latvian President Edgars Rinkēvičs said, “We are not yet out of the woods [..] Are we in an irreversible rift? No. But there is a clear and present danger.” The danger appears not only to Europe and Greenland’s sovereignty, but to US debt markets as well.

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