European Central Bank board member Piero Cipollone cautioned that the rising use of stablecoins could cause retail deposits to move away from European banks, increasing funding costs and threatening smaller lenders. Cipollone spoke on July 17 at a meeting of Italy's cooperative banks in Rome.
He explained that if consumers begin holding money in stablecoins within digital wallets instead of bank accounts, banks will lose a key source of inexpensive funding. This shift would force banks to rely more on costly wholesale borrowing, likely pushing lending rates higher in the economy. Smaller banks are especially vulnerable since they depend heavily on local deposits to finance loans.
Cipollone identified this deposit risk as the latest phase in a broader trend away from traditional banking. Mobile payments already account for over 10% of point-of-sale transactions in countries like Ireland, the Netherlands, and Finland. Although banks earn greater fees from mobile payments than debit card transactions, they lose access to valuable customer transaction data in the process.
He added that if stablecoin adoption grows further, banks will also suffer retail deposit outflows. The ECB views the introduction of a digital euro as a way to preserve public money and maintain banks' role in payments. Europe favors a strategy centered around central bank money, tokenized deposits, and regulated payment infrastructure instead of private stablecoins as foundations of digital finance.
Cipollone also highlighted Europe's dependence on foreign payment systems, noting that about two-thirds of euro area card transactions are processed using non-European networks. This reliance shows the ECB's push for a digital euro to enhance sovereignty over the payments landscape.
This material is for informational purposes only and is not financial advice.
