ECB Warns Stablecoins May Drain Bank Deposits as Digital Euro Plans Advance

Highlights:

• ECB warns rising stablecoin use could pull retail deposits from banks and weaken a key funding source.
• European banks also face pressure from foreign payment platforms, higher fees, and reduced access to customer data.
• ECB plans a 2027 digital euro pilot, with a possible launch in 2029 after legislative approval.

The European Central Bank (ECB) has warned that wider stablecoin adoption could pull retail deposits away from commercial banks. ECB Executive Board member Piero Cipollone raised the concern during a speech at the Federcasse annual meeting in Rome on July 17. “If the use of stablecoins increases in the future, banks will also lose retail deposits,” Cipollone said.

Stablecoins are digital tokens designed to maintain a steady value, often by tracking a traditional currency. If customers move money from bank accounts into these tokens, banks could lose part of their deposit base. Retail deposits remain an important source of funding that banks use to support lending and other financial services.

🇪🇺 JUST IN: ECB warns stablecoins are draining European bank deposits

ECB Executive Board member Piero Cipollone says commercial banks are losing retail deposits and payment revenue to stablecoins and mobile payment providers.

He says Europe is becoming "increasingly dependent… pic.twitter.com/ZvaDjTmZnb

— Coin Bureau (@coinbureau) July 17, 2026

Stablecoins Add to Pressure on European Banks

Cipollone said banks are already facing growing pressure as customers move from cash and traditional debit cards to mobile payment services. Mobile payments now account for more than one in ten in-store transactions in Ireland, the Netherlands and Finland.

Banks often pay higher fees when customers use mobile payment platforms. In some cases, they also receive less information about transactions. As a result, banks may lose both payment revenue and valuable data that helps them understand customers, assess creditworthiness and manage financial risks.

The ECB has previously said stablecoins could create an even broader challenge. Banks may lose fees, payment data and stable retail deposits if customers increasingly use private digital tokens for everyday transactions. Meanwhile, fewer deposits could weaken an important source of bank funding.

Europe also remains heavily dependent on foreign payment systems. Two-thirds of card payments in the euro area currently use non-European schemes. Moreover, 13 of the euro area’s 21 countries do not have a national card network, while more than half lack a domestic online payment solution.

Cipollone argued that banks could gradually lose their position in the payment market to technology platforms and other private providers. A smaller role in payments could also affect lending, particularly for smaller and cooperative banks that rely on close customer relationships and transaction data.

Digital Euro Aims to Keep Deposits Inside Banks

The ECB presented the digital euro as a possible response to these risks. Unlike a cryptocurrency or privately issued stablecoin, the digital euro would be public money issued by the Eurosystem and distributed through commercial banks.

Customers would open digital euro accounts through their banks. They could then use the currency for free payments in stores, online and between individuals across the euro area. The system would also support offline payments when an internet connection is unavailable.

However, the ECB does not plan to make the digital euro a savings product. Digital euro balances would not earn interest, while holding limits would restrict how much each person could keep. The system would also connect with existing bank accounts, reducing the need for customers to store large digital euro balances.

According to the ECB, these safeguards would limit deposit outflows and protect financial stability. Its analysis found that the effect on bank deposits, liquidity and profitability should remain limited under normal conditions and manageable during severe market stress.

ECB Plans 2027 Pilot Before Possible 2029 Launch

The ECB expects to begin a 12-month digital euro pilot in the second half of 2027. It selected 36 payment service providers after receiving applications from more than 50 companies across the euro area.

36 payment service providers from across the euro area have been selected for the digital euro pilot.

Starting in the second half of 2027, the 12-month exercise to test the digital euro’s features will take place at the ECB and 19 national central banks https://t.co/B88b6doEza pic.twitter.com/9MC1OJydRi

— European Central Bank (@ecb) July 14, 2026

The pilot will test payments in real-life settings and examine whether the system is secure, easy to use and able to handle large transaction volumes. However, the ECB will only make a final issuance decision after European lawmakers approve the required regulation. A first digital euro launch could take place in 2029 if the legislation is adopted in 2026.