Key Highlights
- ECB’s Piero Cipollone warned stablecoins could eventually reduce commercial bank deposits.
- He argued Europe’s payment infrastructure is becoming increasingly dependent on foreign providers.
- The ECB says the digital euro would preserve monetary sovereignty while keeping banks at the center of payments.
The European Central Bank has renewed its warning that stablecoins could gradually weaken Europe’s banking sector, arguing that commercial banks risk losing deposits, payment revenues, and customer data as digital payments continue replacing traditional banking channels.
Speaking at the annual meeting of Italy’s Federation of Cooperative Credit Banks (Federcasse), ECB Executive Board member Piero Cipollone said the shift toward smartphones, digital wallets, and stablecoins is changing the structure of Europe’s financial system. “If the use of stablecoins increases in the future, banks will also lose retail deposits,” Cipollone said.
His remarks come as European lawmakers continue negotiating legislation that would eventually introduce the digital euro, the ECB’s proposed central bank digital currency (CBDC).
Why the ECB believes stablecoins are becoming a risk
According to Cipollone, the problem extends beyond stablecoins themselves. He argued that Europe’s payment infrastructure has become increasingly dependent on foreign providers, noting that roughly two-thirds of euro area card payments are processed through non-European payment schemes.
At the same time, banks are already losing payment fees and valuable transaction data as consumers increasingly pay through mobile apps and third-party digital platforms.
“When their customers use mobile payments, banks typically pay higher fees… and often do not receive any information about the payment, so they lose both fees and data,” he said.
From the ECB’s perspective, stablecoins could accelerate that trend by shifting customer funds outside traditional bank deposits altogether.
ECB positions digital euro as the alternative
Cipollone argued that the digital euro is designed to modernize public money without removing banks from the payments ecosystem. Under the proposal, the ECB would issue the digital currency while commercial banks would continue managing customer relationships, onboarding users, and providing payment services.
To reduce the risk of deposit migration, digital euro balances would not earn interest, and individual holdings would remain subject to limits. The ECB maintains that the project is intended to complement cash rather than replace it.
Critics question the need for a digital euro
Not everyone agrees with the ECB’s sense of urgency. While euro-denominated stablecoins have expanded over the past two years, they remain a very small segment of the global market. Industry observers note that euro stablecoins represented roughly €450 million in circulation earlier this year, compared with nearly $300 billion in dollar-backed stablecoins worldwide.
That has led some critics to argue that Europe is building an extensive public digital currency framework before stablecoins have established a meaningful presence across the region.
Others also question whether the digital euro itself could eventually compete with commercial bank deposits, the same concern the ECB says its design is intended to prevent.
Privacy advocates have likewise raised concerns over digital identity integration and programmable payment features, although the ECB says offline functionality and limited data sharing will protect user privacy.
Digital euro still years from launch
Although political momentum continues to build, Europeans are unlikely to use a digital euro anytime soon. Last month, the European Parliament approved its negotiating position, allowing formal trilogue discussions with the European Commission and Council to begin.
Moreover, the ECB recently selected 36 payment service providers to participate in its pilot program, scheduled to begin in 2027. The bank outlined that timeline while announcing the next phase of the project and its pilot partnerships, saying the initiative is intended to reduce Europe’s dependence on international payment providers while modernizing cross-border payments.
Europe and the U.S. continue taking different approaches
The debate also underscores the growing policy divide between Europe and the United States.
While the ECB continues promoting a publicly issued digital euro, U.S. lawmakers have largely moved in the opposite direction. Instead of developing a retail CBDC, Congress has focused on regulating privately issued stablecoins through the GENIUS Act, while limiting the Federal Reserve’s ability to introduce a retail central bank digital currency.
The contrasting strategies highlight two competing visions for the future of digital money: one centered on public infrastructure and another built around regulated private stablecoin issuers.
Also Read: Paradigm Urges NCUA to Revise GENIUS Act Stablecoin Rules
