ECB warns euro stablecoins could drain bank deposits, blunt rates

The European Central Bank told EU finance ministers meeting in Nicosia that wider issuance of euro stablecoins could pull retail deposits from commercial banks, reduce banks’ capacity to lend and blunt the transmission of ECB interest-rate changes.

ECB officials explained that if households move savings into private stablecoins, banks would have fewer deposits to back loans. Officials said a smaller deposit base could lower overall credit supply and tighten borrowing conditions across the euro area as lenders adjust funding and balance sheets.

Officials added that the main route for ECB rate changes to affect the economy runs through deposit-backed lending. If deposits fall and savings sit in private tokens instead, adjustments to the policy rate may have less direct impact on lending rates and borrowing decisions.

The warning followed a paper circulated by the Brussels think tank Bruegel at Eurogroup and Ecofin meetings. Bruegel argued that strict rules under the EU’s Markets in Crypto-Assets framework have left European issuers at a disadvantage to dollar-backed tokens and urged looser liquidity requirements and possible access to central-bank funding for some private tokens.

EU officials have also warned that a rise in dollar-denominated stablecoins could reduce the euro’s role in cross-border payments. The ECB favors a central-bank-issued digital euro as an alternative; ECB President Christine Lagarde has called the digital euro “a strategic priority for Europe’s financial infrastructure.”

Private-sector activity continues: nine lenders are preparing a MiCAR-compliant euro stablecoin launch in 2026. Ministers in Nicosia debated whether to adjust parts of the MiCA regime to help European issuers compete, raising questions about financial-stability oversight and market competitiveness.

EU finance ministers and regulators are scheduled to decide in the coming months on MiCA implementation, supervision of stablecoin issuers and the development of a digital euro.