ECB's Cipollone warns stablecoins threaten bank deposits, 36 PSPs join pilot

European Central Bank Executive Board member Piero Cipollone said stablecoin adoption threatens to erode bank deposits, arguing the digital euro would preserve public money's role as payments shift online.

"Stablecoins could erode commercial banks' retail deposit base," Cipollone said Friday in a speech to Italy's Federation of Cooperative Credit Banks in Rome. "The digital euro would both preserve the role of public money and ensure banks remain involved in the payments ecosystem."

The ECB on July 14 selected 36 payment service providers from a pool of more than 50 applicants for a 12-month digital euro pilot beginning in the second half of 2027. The trial will test online and offline person-to-person and person-to-business transactions across the ECB and 19 national central banks, using a beta version technically close to proposed legislation but lacking legal tender status.

EU co-legislators are targeting completion of the digital euro's legislative framework by the end of 2026, with actual issuance targeted for 2029. The no-interest, capped-holdings design aims to prevent the CBDC from competing with bank deposits — the same dynamic Cipollone warned stablecoins could trigger.

Banks are already losing payment fees and transaction data to mobile payment providers, Cipollone said. The digital euro would keep banks as intermediaries rather than having the ECB interact directly with consumers, preserving their customer-facing role in the payments system.

The ECB brought Nexo Standards, the Berlin Group and the European Cards Payment Cooperation into the project in April to align digital euro payments with existing open technical standards. PSPs and acquirers in the pilot will connect with merchant systems via Nexo Standards' ISO 20022-based specifications, while the Berlin Group provides the framework for alias-based initiation and reconciliation.

What the digital euro means for stablecoins

A digital euro that is free to hold, backed by the ECB and accepted across the eurozone would be a direct competitor to euro-denominated stablecoins. The no-interest, capped-holdings design limits its appeal as a DeFi building block, but its status as central bank money creates a trust advantage that private stablecoin issuers cannot match.

Europe currently relies heavily on non-European payment solutions, primarily Visa and Mastercard, for digital transactions. The digital euro is partly about strategic autonomy — ensuring Europe's payment infrastructure is not dependent on companies headquartered outside the continent. As the ECB builds out its CBDC framework alongside the Markets in Crypto-Assets regulation, it is creating a more comprehensive regulatory environment for digital money broadly.

This article is for informational purposes only and does not constitute investment advice.