Piero Cipollone, a Member of the Executive Board of Directors of the European Central Bank (ECB), issued a stark warning on Friday that stablecoins pose a significant threat to Europe’s traditional banking system.
Speaking at a gathering of Italy’s cooperative banks in Rome on July 17, he emphasized that the growing popularity of these digital assets could detach retail deposits from commercial banks, forcing lenders into more expensive borrowing.
Stablecoins threaten European banking stability
This potential shift adds to existing pressures on banks, which have already seen revenues and valuable customer data eroded by the rise of mobile payment platforms. For smaller banks particularly, this development could increase lending rates across the economy as they seek alternative funding sources to finance local loans.
Cipollone highlighted how the increasing adoption of stablecoins could directly impact banks’ deposit bases. He pointed out that mobile payments currently account for more than 10% of point-of-sale transactions in countries like Ireland, the Netherlands, and Finland.
While banks might earn higher fees from mobile payments compared to debit card transactions, they often lose access to crucial customer data. The ECB executive made it clear: “If the use of stablecoins increases in the future, the banks will also lose retail deposits.”
This concern extends beyond deposits to Europe’s broader financial independence. The ECB noted that approximately two-thirds of euro area card transactions rely on non-European networks. Furthermore, 13 of the 21 eurozone countries lack a domestic card facility, underscoring a deep reliance on external payment infrastructure.
The digital euro as ECB’s strategic counter
In response to these emerging challenges, the European Central Bank is actively promoting its proposed digital euro as a crucial solution. Piero Cipollone stated the digital euro would “preserve the role of public money and ensure banks remain involved in the payments ecosystem.”
The central bank digital currency (CBDC) is being designed not to pay interest, and it will include limits on the amount of money individuals can hold. These measures aim to prevent large-scale capital outflows from the traditional banking system, ensuring stability.
The digital euro would be distributed through existing commercial banks, rather than directly by the ECB, maintaining their intermediary role. The European Parliament has already approved the initiation of formal legislative processes for the digital euro, signaling a clear path forward.
Piloting Europe’s new digital currency
The ECB has made substantial progress towards implementing the digital euro. Just recently, on July 14, 2026, the bank named 36 payment service providers (PSPs) selected for a 12-month pilot program.
These participants include major financial institutions like Deutsche Bank, UniCredit, and Revolut, alongside fintech firms such as Stripe, Adyen, SumUp, and Worldline. The pilot, scheduled to begin in the second half of 2027, will test beta digital euro functionalities in various scenarios, including person-to-person, in-store, and e-commerce payments.
While the pilot is set for 2027, the ECB isn’t expecting a full official launch of the digital euro until at least 2029. This extended timeline reflects the complexity of integrating a new digital currency into Europe’s vast and diverse financial landscape.
MiCA’s uneven grip on stablecoin markets
Stablecoins are cryptocurrencies pegged to fiat currencies, with the U.S. dollar being the most prevalent peg. Tether’s USDT and Circle’s USDC dominate this market, together accounting for 84% of the roughly $300 billion global stablecoin market.
The European Union’s Markets in Crypto-Assets (MiCA) framework regulates euro-denominated stablecoins, requiring issuers to hold significant reserves in bank deposits. However, MiCA leaves most dollar-pegged stablecoins largely outside its direct oversight, creating a regulatory asymmetry.
This regulatory gap amplifies the ECB’s concerns, as many of these dominant dollar-pegged stablecoins are issued from outside the EU. ECB Executive Board member Isabel Schnabel has also voiced similar worries, drawing parallels to how money-market funds diverted bank deposits in the 1970s.
Circle, a major stablecoin issuer, has actively worked to comply with MiCA for its USDC and euro-denominated EURC tokens. EURC, though currently valued at $424 million in circulation—over 400 times smaller than USDT—is uniquely positioned for European users due to its compliance.
Shaping Europe’s digital payment future
The ECB’s stance clearly indicates a preference for tokenized bank deposits and the digital euro over private stablecoins as foundational elements for Europe’s future digital payment infrastructure. This perspective could limit the broader adoption of private stablecoins within the EU, even those that comply with MiCA.
Beyond retail payments, the European Central Bank is also engaged in initiatives like Project Pontes, aimed at settling tokenized assets with central bank money. Another effort, Project Appia, seeks to establish a public-private marketplace for tokenized finance.
These projects underscore the ECB’s concerted effort to maintain the central role of commercial banks and central bank money in the evolving digital financial system. The strategy is a multi-pronged approach to ensure monetary sovereignty and financial stability in an increasingly tokenized world, rather than ceding ground to privately issued digital assets.
The battle for the future of payments in Europe is taking shape, with the ECB firmly positioning the digital euro as the core of its strategy. It’s a clear signal that the institution intends to actively steer the direction of digital finance, rather than simply react to market developments, aiming to safeguard the continent’s economic independence and the stability of its financial system.