ECB researchers warn that the rapid retail adoption of stablecoins is putting sustained pressure on eurozone banks’ retail deposits. This “deposit substitution” effect sees savers shifting funds that would have gone into commercial bank accounts toward more-flexible, higher-yield stablecoin products. At the same time, the pool of funds banks can deploy for corporate lending is shrinking, weakening the transmission of monetary policy.
In the traditional financial system, central banks influence bank lending by adjusting interest rates, thereby stimulating or cooling economic activity. But when large volumes of capital leave the banking sector and flow into decentralized finance channels, that transmission mechanism can stall.
Experts say that if stablecoin usage continues to expand, the ECB may face serious challenges in managing liquidity and credit conditions. Regulators are closely monitoring the trend to assess whether new frameworks are needed to preserve financial stability.
