[DigitalToday reporter Hyeonwoo Chu] The European Central Bank warned that the spread of stablecoins could erode European banks’ retail deposits and presented a digital euro as a countermeasure.

On July 17, blockchain media outlet Decrypt reported that ECB Executive Board member Piero Cipollone (피에로 치폴로네) said at a banking conference in Rome that banks that have lost fees and transaction data to mobile payments could next see their deposit base shaken.

Cipollone said traditional debit card payments are also being used less and less. He said mobile payments already account for more than one-tenth of offline payments in Ireland, the Netherlands and Finland.

He said customers’ use of mobile payments often leaves banks paying higher fees than for debit cards and frequently prevents them from receiving payment information. He added that if stablecoin use rises, banks could also lose retail deposits.

Stablecoins are generally privately issued cryptocurrencies pegged one-to-one to a fiat currency. Users can store and move funds outside bank accounts. The global stablecoin market is worth about $300 billion, according to DeFiLlama, and most of it is dollar-denominated assets.

The ECB views a drop in deposits as something that could weaken lending capacity. In particular, half of Italian cooperative bank branches are in areas with populations under 10,000, so falling payment data and deposits could deal a heavy blow to local lending businesses.

The ECB is pursuing a digital euro as a structural solution. The digital euro would be an electronic form of cash issued by the central bank but distributed through commercial banks. Under the current design, banks would continue to manage customer accounts while preserving fees and transaction data. The ECB selected 36 payment service providers, including Deutsche Bank, UniCredit and Revolut, for a 12-month pilot starting in the second half of 2027.

There are also concerns that a digital euro could instead draw in deposits. The ECB’s policy is to avoid paying interest on the digital euro and to set holding limits to reduce incentives for large-scale fund shifts. In its own financial stability analysis, it concluded that the design would not pose a material risk to bank liquidity.

Legislative procedures are also under way. On July 9, the European Parliament agreed to open formal legislative negotiations by 416 votes to 169. The first meeting was held four days later, and the target time for concluding negotiations is the end of 2026. The first issuance date was presented as 2029.