The European Central Bank has published a working paper dedicated to the impact of stablecoins on the banking system of the eurozone. In it, experts analyze the potential risks that arise from the growing popularity of digital assets and warn that this phenomenon could pose a significant threat to the traditional banking funding model.
This is reported by Finway
Growth of Stablecoins and Decline of Bank Deposits
According to the findings of the document, the active adoption of stablecoins could lead to a significant outflow of funds from traditional bank deposits. As a result, financial institutions would be forced to turn to more expensive sources of market financing. Experts emphasize that such changes could negatively affect the volume of lending to businesses and households.
The document notes that the effect of the spread of stablecoins on the eurozone banking system is non-linear. The impact depends on the level of adoption of digital assets, their technical architecture, and the regulatory environment in which they operate. Over the past three years, the market capitalization of stablecoins has exceeded $300 billion, and by 2028, this figure could reach $2 trillion.
Currency Structure of the Market and Risks to Monetary Policy
Separately, the analytical study examines the effect of deposit substitution. This refers to the trend where companies and individuals transfer funds from bank accounts to digital wallets. This limits banks’ ability to lend to the real economy and affects the effectiveness of monetary transmission — that is, the regulator’s ability to influence the economy through changes in interest rates.
The ECB has paid special attention to the currency structure of the stablecoin market. According to expert estimates, about 97% of digital assets in this class are denominated in US dollars. The dominance of dollar-denominated tokens, according to analysts, increases risks to the monetary sovereignty of the eurozone and may reduce the effectiveness of domestic economic policy.
“The authors also point out that the spread of stablecoins can change the mechanism of interest rate transmission in the economy. According to their assessment, the growth of digital assets may reduce the predictability of bank lending responses to regulatory decisions.”
At the same time, the document emphasizes that the ECB is not currently proposing specific regulatory steps to limit or ban the use of stablecoins. The analysts’ conclusions reflect a general concern about how rapidly the digital asset market is developing and how this could transform traditional financial approaches in the eurozone.
Dynamics of capitalization of major USD and EUR stablecoins. Data: ECB.