European Central Bank board member Piero Cipollone has delivered a stark warning to the continent’s banking sector: stablecoins could cost lenders the retail deposits they depend on to function, adding a third layer of damage on top of losses already inflicted by mobile payments.
Cipollone laid out the threat in a speech Friday at a banking conference in Rome, pitching the digital euro as the only structural response available to eurozone institutions.
A Three-Layer Problem
Cipollone framed the pressure on European banks as cumulative. First, mobile payments took fee income and transaction data. Then digital payment platforms deepened that erosion. Now stablecoins represent a qualitatively different threat because they operate entirely outside the banking system.
‘When their customers use mobile payments, banks typically pay higher fees than those associated with debit cards and often do not receive any information about the payment, so they lose both fees and data,’ Cipollone said. ‘If the use of stablecoins increases in the future, banks will also lose retail deposits.’
He noted that mobile payments already exceed one in ten point-of-sale transactions in Ireland, the Netherlands, and Finland, with traditional debit card usage declining even before stablecoin adoption becomes a mass-market question.
Why Deposits Are the Critical Variable
Stablecoins are privately issued crypto tokens pegged 1:1 to a fiat currency, most commonly the US dollar, that allow users to hold and transfer money without touching the banking system. The global stablecoin market sits at roughly 300 billion dollars and is almost entirely dollar-denominated, according to DefiLlama data.
Deposits are not simply a passive liability on a bank’s balance sheet. They are the raw material banks use to extend credit to businesses and homebuyers. A meaningful outflow into stablecoin wallets would reduce the lending capacity of institutions that already operate on thin margins, a problem Cipollone highlighted specifically for Italian cooperative banks. Half of Italy’s cooperative bank branches serve towns with fewer than 10,000 people, where payment data underpins local lending decisions.
The Digital Euro as the ECB’s Answer
The ECB’s proposed solution is a government-issued digital euro distributed through commercial banks rather than bypassing them. Under the current design, banks retain customer accounts, collect interchange fees, and keep transaction data. The ECB has already selected 36 payment service providers for a 12-month pilot set to begin in the second half of 2027. Named participants include Deutsche Bank, UniCredit, and Revolut.
The central bank has built guardrails into the design to prevent the digital euro from replicating the deposit-drain problem it is meant to solve. The instrument will pay no interest, removing the incentive to park large sums in it, and holding limits will cap individual balances. The ECB’s own financial stability analysis concluded the design poses no material risk to bank liquidity.
Legislative Timeline Tightening
Critics have not been fully persuaded that the guardrails are sufficient, and the ECB’s repeated stablecoin warnings have not visibly slowed market growth. But the legislative process is accelerating. Negotiations on the digital euro were approved on July 9, with the first session held four days later. Lawmakers are targeting a deal by the end of 2026, with first issuance projected for 2029.
Two-thirds of card payments in the euro area currently route through non-European schemes, and 13 of the 21 eurozone countries have no national card scheme of their own, underscoring the structural dependence Cipollone is trying to address.
