ECB says stablecoins could erode bank deposits; digital euro pilot set for 2027

The European Central Bank is warning that rapid adoption of stablecoins could drain commercial banks' retail deposit base, raising fresh questions about whether Europe's planned digital euro is primarily about better payments or about keeping deposits, data and customers within the banking system. ECB Executive Board member Piero Cipollone delivered the message at a meeting of the Federation of Italian Cooperative Credit Banks, arguing that broader stablecoin use would likely reduce bank deposits. He also pointed to pressure from mobile payment providers, which he said are already capturing payment fees and valuable customer data. Cipollone framed the issue as bigger than banking, highlighting Europe's reliance on foreign payment infrastructures. He said the digital euro is intended to preserve the role of public money while keeping banks central to the payments ecosystem and able to serve customer needs. Project work is progressing. The ECB has selected 36 banks, fintech firms and payment companies for a 12-month pilot expected to start in the second half of 2027. No final go-ahead has been issued, though a digital euro could be launched as early as 2029. A key objective is to reduce dependence on foreign card networks and payment platforms, improving resilience and giving the region greater control over money flows. The initiative would also help banks maintain a core role as stablecoins and fintech competitors expand. Even so, the project's success will ultimately be judged by practical outcomes: whether it makes payments cheaper, easier and more useful for consumers and businesses. Without clear benefits, critics argue it risks becoming more of a tool to protect the existing banking system than to improve it. Final summary: The ECB says stablecoins could weaken commercial banks. A 36-provider digital euro pilot is planned for 2027, with a potential launch in 2029.