The European Central Bank (ECB) is growing increasingly uneasy. This time, the concern is not inflation or interest rates, but a threat emerging from digital wallets: stablecoins. Piero Cipollone, a member of the ECB executive board, warned that the surging popularity of stablecoins could drain customer deposits from European banks - with small cooperative lenders that serve as the credit backbone of tiny towns being the most vulnerable.
Speaking Friday at a banking conference in Rome, Cipollone described an ongoing behavioral shift. “Even traditional debit card payments are becoming less popular. Mobile payments are on the rise and have already exceeded one in ten point-of-sale transactions in Ireland, the Netherlands, and Finland,” he said.
Why Small Banks Are Most at Risk
The issue goes beyond technological prestige. According to Cipollone, when customers switch to mobile payments, banks lose out twice. “If customers use mobile payments, banks typically pay higher fees compared to debit cards and often receive no payment information, so banks lose both fees and data. If stablecoin adoption increases in the future, banks will also lose retail deposits,” he said.
He delivered the message directly to Italian cooperative banking executives - and for good reason. Half of Italy’s cooperative bank branches serve towns with fewer than 10,000 residents. There, the loss of payment data and local deposits could directly deflate their lending business, which serves as the primary credit source for local residents.
Stablecoins are private crypto tokens pegged 1:1 to fiat currencies - mostly the US dollar. They allow individuals to store and transfer money entirely outside the banking system, functioning like digital dollars residing in mobile apps instead of bank accounts. Their market capitalization currently stands at around $300 billion according to DefiLlama data, with almost all of it dollar-denominated.
The Digital Euro, the ECB’s Prepared Counterweapon
The ECB’s answer to this threat has a name: the digital euro. It is government-issued electronic money, but unlike private stablecoins, it is distributed through commercial banks - not replacing them. Under this model, banks continue to hold customer accounts, collect interchange fees, and retain transaction data.
The ECB has already appointed 36 payment providers - including Deutsche Bank, UniCredit, and Revolut - for a 12-month pilot program starting in the second half of 2027. To prevent unintended fallout, the digital euro is designed to be non-interest-bearing and subject to holding limits to deter hoarding large balances. The ECB’s own financial stability analysis concluded that this design poses “no material risk” to bank liquidity.
On the legislative front, negotiations on the digital euro were formally approved to start on July 9, with the first session held four days later. The target for a final agreement is set for late 2026, with an initial rollout aimed for 2029.
What Still Hangs in the Balance
The problem is that rhetoric and reality have yet to align. The ECB has repeatedly issued warnings about stablecoins, but so far this has done little to slow the growth of an expanding stablecoin market. Critics also remain unconvinced that the digital euro is the right remedy. For readers in Indonesia, perhaps the broader takeaway is this: the battle between private digital currency and central bank money has only just begun, and traditional banks are starting to feel their ground shake.
Reported via Decrypt.
Read also: What Is DeFi (Decentralized Finance)?
Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
