3 min read
European banks are losing the payments war in installments. First came mobile apps, which took their fees and transaction data, then digital payments and startups took even more control. Now the ECB is warning that stablecoins could take the thing that really hurts: their deposits.
Piero Cipollone, an executive board member of the European Central Bank, delivered that message Friday at a banking conference in Rome, and framed the digital euro as the structural answer.
“Even traditional debit card payments are becoming less popular. In fact, mobile payments are on the rise and they already exceed one in ten point-of-sale transactions in Ireland, the Netherlands and Finland,” he said.
“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 added. “If the use of stablecoins increases in the future, banks will also lose retail deposits.”
He was speaking to Italian cooperative bank executives who have their own reasons to be nervous: Half of Italy's cooperative bank branches serve towns with fewer than 10,000 people, where the loss of payment data could hollow out the local lending business.
Stablecoins add a new layer to that problem. They're privately issued crypto tokens pegged 1:1 to a fiat currency—almost always the dollar—that let users hold and move money entirely outside the banking system. Think of them as a digital dollar you keep in an app rather than a bank account. Even fintechs like PayPal, Stripe, and others rely on the traditional banking system one way or another.
The global stablecoin market sits at roughly $300 billion, per DefiLlama data, and is almost entirely dollar-denominated.
Cipollone is worried that the massification of stablecoin adoption may render cash deposits irrelevant. Mobile payments cost banks fees and data; stablecoins could cost them the deposit base they rely on to make loans.
Deposits aren't just a number in a ledger. They're the raw material banks use to extend credit to businesses and homebuyers. Fewer deposits means less lending—and for small cooperative banks with thin margins and local customer bases, that's an existential problem, not a spreadsheet one.
The ECB's proposed fix is, ironically, a digital euro: a government-issued, electronic form of cash distributed through—not instead of—commercial banks. Under the current design, banks keep customer accounts, earn interchange fees, and retain transaction data. The ECB has already named 36 payment providers—including Deutsche Bank, UniCredit, and Revolut—for a 12-month pilot starting in the second half of 2027.
The obvious objection is that a risk-free, government-backed digital wallet could drain deposits just as surely as a stablecoin. The ECB has guardrails in mind: the digital euro will pay no interest, removing the incentive to park large sums in it, and holding limits will cap how much anyone can keep in a digital euro account. The bank's own financial stability analysis concluded the design poses no material risk to bank liquidity.
Critics haven't been fully convinced, and the ECB's repeated stablecoin warnings haven't visibly slowed the market. But the legislative machinery is now moving.
Per Cipollone, negotiations on the digital euro are already underway being approved on July 9, with the first session held four days later. Lawmakers are targeting a deal by the end of 2026. First issuance is eyed for 2029.
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