ECB Official: Stablecoins May Erode Bank Deposits; Digital Euro as Long-Term Solution

Huoxing Finance reports that on July 18, Piero Cipollone, a member of the Executive Board of the European Central Bank (ECB), stated that as stablecoins gain popularity, European commercial banks may face the risk of retail deposit outflows in the future, with the digital euro serving as a long-term solution to this challenge. Cipollone noted that mobile payments have already caused banks to lose part of their fee income and transaction data, and the growth of stablecoins could further erode banks’ most fundamental source of funding—retail deposits—thereby impacting their lending capacity. He added that the global stablecoin market is currently valued at approximately $300 billion, with the vast majority pegged to the U.S. dollar. To address these challenges, the ECB is advancing the digital euro initiative. Under the proposed design, commercial banks would manage digital euro accounts, with non-interest-bearing limits on holdings to reduce the risk of large-scale capital outflows from the banking system. The ECB has selected 36 payment service providers to participate in the digital euro pilot, which is scheduled to launch in the second half of 2027 and last for 12 months. Additionally, the European Parliament approved the initiation of legislative negotiations on the digital euro in early July, with the goal of reaching agreement on the relevant legislation by the end of 2026; the digital euro is expected to be officially launched no earlier than 2029.