ECB Flags Stablecoins as a Growing Risk to Bank Lending
The ECB warns that rising stablecoin use risks draining bank deposits and weakening monetary policy transmission to lending.Summary
A new European Central Bank working paper suggests that the growing adoption of stablecoins, often pegged to currencies like the USD or euro, poses a risk by drawing funds away from traditional retail bank deposits. This deposit substitution effect forces banks to rely on more expensive and less stable wholesale funding, consequently reducing the credit they extend to the real economy. Furthermore, the ECB finds that stablecoin adoption interferes with monetary policy transmission channels, potentially weakening the predictability of policy actions. Concerns are heightened by the dominance of foreign-currency stablecoins, particularly those denominated in US dollars, which could further decouple domestic monetary policy from bank lending in the euro area.
(Source：Cointelegraph)