ECB Warns Stablecoins Could Drain Deposits From Euro‑Zone Banks

Frankfurt, Nov. 24, 2025 — The European Central Bank (ECB) has sounded the alarm that the rapid growth of stablecoins — digital tokens designed to hold a steady value — could pull retail money away from traditional euro‑zone banks, undermining their funding base and increasing financial instability.

In its latest Financial Stability Review, the ECB noted that while stablecoins remain a relatively small market, they are highly active in crypto trading, with a huge majority of trades on centralized exchanges involving these digital assets. The central bank warned that if households shift part of their bank deposits into stablecoins — especially in a run — banks could face serious funding pressure, since stablecoin issuers may hold reserves in more volatile or less stable forms of financing.

A particularly worrying risk, the ECB argued, is that some stablecoin issuers hold large amounts of U.S. Treasury bills. If many users try to redeem their stablecoins at once, it could trigger a “fire sale” of these reserve assets, disrupting U.S. Treasury markets and potentially souring financial markets more broadly. The ECB also pointed to cross-border risks: if a stablecoin is co-issued by an EU and non-EU entity, redemption pressure could fall disproportionately on the EU-based issuer, triggering liquidity stress.

The warning underscores a growing concern at the ECB over how stablecoins might erode traditional banking systems and why regulators need to build stronger guardrails around digital-asset issuers.