Banks fear deposit flight from ECB wallets, pushing their own Qivalis stablecoin alternative. The summer vote on digital euro legislation is the next catalyst.
European banks are blocking the European Central Bank's digital euro over fears that customers will shift deposits from commercial bank accounts to ECB-controlled wallets. The three-year legislative stalemate in the European Parliament, reported by Reuters on Thursday, reflects a deeper fight over payment sovereignty and the future role of the euro zone's banking system.
The immediate read is straightforward: banks fear disintermediation. If the digital euro becomes too attractive as a store of value, depositors could drain low-cost funding from lenders, squeezing net interest margins and forcing banks to replace deposits with wholesale funding. The better market read is that this is a two-front negotiation over who controls digital payments in Europe. Banks are not simply opposing the digital euro – they are building an alternative.
Legislation to authorize a digital euro has been stalled since 2022 in the European Parliament. The core friction point is the deposit flight mechanism: how to prevent a run from commercial bank deposits into ECB-issued digital cash. If a digital euro wallet is designed for everyday payments without holding limits, it could become a safe haven during stress, accelerating bank runs. Politicians and regulators have debated caps on individual holdings, tiered remuneration, and interoperability with existing bank accounts. No consensus has emerged.
Fernando Navarrete, the EU lawmaker overseeing digital euro legislation, expects a final vote this summer. "Europe is moving toward payment sovereignty by developing both private interoperable payment solutions and the digital euro," Navarrete said. "The real challenge is to make the development of both options compatible and efficient without imposing additional costs on citizens."
The quote underscores a key trade-off: sovereignty cannot come at the expense of usability or cost. Banks argue that an ECB wallet that competes directly with their deposit products would impose implicit costs through higher funding expenses. Those costs would eventually reach consumers.
Even without legislative approval, the ECB is building digital euro infrastructure. In April it signed agreements with three European standard setters – the European Card Payment Cooperation (ECPC), nexo standards, and the Berlin Group – to reuse their existing open technical standards for processing digital euro online payments. The framework is ready. The political will is not.
On Wednesday, an additional 25 banks joined a consortium developing a euro-pegged cryptocurrency. The venture, Qivalis, was formed in December by 10 of Europe’s biggest banks. Its goal is to launch a stablecoin that provides convenience and "monetary autonomy in the digital age," according to PYMNTS.
Qivalis represents a bank-led countermove to the ECB: keep settlement inside the private banking system while still offering digital euro-like functionality. A euro-pegged stablecoin issued by a consortium of lenders would not trigger deposit flight because the backing assets would likely remain within the banking system – short-term sovereign or central bank deposits. The trade-off is trust: a private stablecoin lacks the central bank guarantee that gives the digital euro its safety advantage.
Euro-pegged stablecoins are not new, they have struggled to gain traction beyond crypto-native users. The Qivalis push benefits from the Markets in Crypto-Assets (MiCA) regulation, which provides a licensing framework for stablecoin issuers in the EU. If the digital euro remains stalled, regulated stablecoins could fill the gap – and banks control the distribution channels.
The euro zone’s growing reliance on U.S. payment processors is a major driver of the sovereignty debate. Visa and Mastercard handle nearly two-thirds of card payments in the euro zone. PayPal and Apple are capturing an increasing share of online and mobile transactions. European policymakers worry that the region’s payment infrastructure is strategically vulnerable, especially as cash usage declines.
A digital euro or a bank-backed stablecoin would give European merchants and consumers an alternative to the U.S. network oligopoly. If either option gains critical mass, transaction fees that now flow to Visa and Mastercard could be redirected to European clearing infrastructure. The ECB’s agreements with ECPC, nexo, and Berlin Group are explicitly designed to allow digital euro payments to settle on European card standards, bypassing U.S. networks entirely.
Mastercard (MA) currently holds an Alpha Score of 63/100 (Moderate, sector Financials). The stock page is at /stocks/ma. The read-through for the stock is mixed: a slow digital euro rollout reduces near-term disruption, the Qivalis stablecoin could accelerate the shift to bank-controlled domestic clearing. Visa faces the same structural risk. The key confirmation point would be a digital euro regulation passing in the European Parliament this summer – that would trigger a formal technical build-out with a clear timeline for network bypass.
Two factors would weaken the threat to U.S. processors. First, if the digital euro legislation includes generous holding limits that cap wallet balances at a few hundred euros, the deposit flight risk for banks is contained. The digital euro becomes a minor payment tool rather than a system replacer. Second, if the Qivalis stablecoin fails to gain merchant acceptance or runs into regulatory hurdles under MiCA, the bank alternative loses credibility. Both outcomes preserve the current Visa/Mastercard duopoly in European card payments.
The digital euro debate is about more than a CBDC – it is a referendum on whether Europe wants its payment infrastructure controlled by U.S. firms. The three-year legislative delay gives incumbents breathing room. The Qivalis stablecoin push shows that banks are preparing for a post-Visa future regardless of the ECB timetable. Watch the Navarrete vote this summer and the Qivalis testnet launch as the next catalysts. For broader crypto market context, see AlphaScala's crypto market analysis. For a look at stablecoin competition risk, see Bitfire stablecoin push deepens despite 19x loss widening.
Prepared with AlphaScala research tooling and grounded in primary market data: live prices, fundamentals, SEC filings, hedge-fund holdings, and insider activity. Each story is checked against AlphaScala publishing rules before release. Educational coverage, not personalized advice.