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ECB warns stablecoins threaten bank deposits, pushes digital euro
ECB's Cipollone warns stablecoins threaten retail deposits, forcing banks to replace cheap funding with wholesale borrowing. Digital euro pilot set for 2027.
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Piero Cipollone, a member of the European Central Bank's executive board, warned Friday that rising stablecoin use threatens to pull retail deposits out of commercial banks. Speaking at a Federation of Italian Cooperative Credit Banks gathering in Rome on July 17, he said the trend forces lenders to replace cheap deposit funding with more expensive wholesale borrowing. That would push up lending rates across the eurozone economy.
Cipollone framed the deposit risk as the latest pressure point in a longer migration away from traditional banking. Mobile payments already cover more than 10% of point-of-sale transactions in Ireland, the Netherlands, and Finland, he noted. Banks collect higher fees on mobile payments than on debit card swipes. They lose access to the transaction data that comes with card networks.
"If the use of stablecoins increases in the future, the banks will also lose retail deposits," Cipollone said.
Smaller banks are most exposed. They depend on customer deposits to fund local loans. If those deposits shift into stablecoins held in digital wallets, lenders would need to tap wholesale funding markets at higher rates, Cipollone argued. That dynamic would feed through to borrowing costs for households and businesses.
The ECB has been pushing its digital euro project as the alternative. The proposed central bank digital currency would not pay interest and would cap the amount any individual could hold. Those features are designed to prevent mass withdrawals. Banks would still distribute the digital euro to customers rather than the ECB dealing directly with the public.
"The digital euro would both preserve the role of public money and ensure banks remain involved in the payments ecosystem while continuing to meet their customers' needs," Cipollone said.