ECB executive board member Piero Cipollone warned Friday that stablecoin adoption could drain retail deposits from European banks, compounding losses already incurred through mobile payment fees and transaction data. The warning came as the ECB named 36 payment service providers for a digital euro pilot starting in the second half of 2027, days after the European Parliament voted 416 to 169 to begin formal legislative negotiations. Two-thirds of card payments in the euro area currently route through non-European schemes, and 13 of 21 eurozone countries operate without national card schemes. Cipollone framed the digital euro as a structural response to payment infrastructure erosion, stating that banks lose both fees and data when customers use mobile payments, and would lose retail deposits if stablecoin use increases. The global stablecoin market stands at roughly $300 billion according to DefiLlama data, almost entirely denominated in dollars.
Mobile Payments Strip European Banks of Fees and Transaction Data
Cipollone delivered the message at a banking conference in Rome, noting that mobile payments already exceed one in ten point-of-sale transactions in Ireland, the Netherlands, and Finland. "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 stated. He was addressing Italian cooperative bank executives, half of whose branches serve towns with fewer than 10,000 people where loss of payment data could undermine local lending operations. Traditional debit card payments are becoming less popular as mobile payment adoption rises across the eurozone.
Stablecoins Threaten Bank Deposit Base Used for Lending
Cipollone warned that stablecoin growth poses a deeper threat than mobile payments. "If the use of stablecoins increases in the future, banks will also lose retail deposits," he said. Stablecoins are privately issued crypto tokens pegged 1:1 to a fiat currency that let users hold and move money entirely outside the banking system. The global stablecoin market sits at roughly $300 billion per DefiLlama data and is almost entirely dollar-denominated. Deposits function as the raw material banks use to extend credit to businesses and homebuyers. Fewer deposits means less lending capacity, creating an existential problem for small cooperative banks with thin margins and local customer bases.
ECB Names 36 Payment Providers for Digital Euro Pilot Starting Second Half of 2027
The ECB named 36 payment service providers—including Deutsche Bank, UniCredit, and Revolut—for a 12-month digital euro pilot starting in the second half of 2027. Under the current design, banks keep customer accounts, earn interchange fees, and retain transaction data. The digital euro will pay no interest, removing the incentive to park large sums, and holding limits will cap how much anyone can keep in a digital euro account. The ECB's financial stability analysis concluded the design poses no material risk to bank liquidity. First issuance is eyed for 2029.
European Parliament Approves Digital Euro Legislative Negotiations
Negotiations on the digital euro began following approval on July 9, with the first session held four days later. The European Parliament voted 416 to 169 to begin formal legislative negotiations. Lawmakers are targeting a deal by the end of 2026 according to Cipollone's statement at the Rome conference.
FAQ
Why does the ECB warn that stablecoins could drain bank deposits?
Stablecoins allow users to hold and move money entirely outside the banking system, meaning funds that would traditionally sit in bank deposit accounts could shift to stablecoin wallets. Banks rely on deposits as the raw material to extend credit to businesses and homebuyers, so a reduction in deposits directly reduces lending capacity.
How does the digital euro design prevent deposit flight from commercial banks?
The ECB's digital euro will pay no interest and impose holding limits on how much anyone can keep in a digital euro account. These design features remove the incentive to park large sums in the digital euro, ensuring it functions as a payment tool rather than a savings vehicle. The ECB's financial stability analysis concluded this design poses no material risk to bank liquidity.
