ECB Advisor: Stablecoins Risk Upending the European Banking System

Jürgen Schaaf, Advisor to the Senior Management of Market Infrastructure and Payments at the ECB, has warned about the potential impact of stablecoins in Europe, claiming that they could weaken the banking system by diverting deposits to decentralized alternatives.

ECB Adviser Jürgen Schaaf Warns About Potential Erosion of the Banking System by Stablecoins

European authorities are growing concerned about the effect of the rising popularity of stablecoins on their domestic banking and payments systems. Jürgen Schaaf, Advisor to the Senior Management of Market Infrastructure and Payments at the European Central Bank (ECB), warned that an uncontrolled and unregulated adoption of stablecoins could bring growing pains to the Eurozone, potentially disrupting the European Union’s (EU) banking ecosystem.

In a recently published article titled “From hype to hazard: what stablecoins mean for Europe,” Schaaf claims that stablecoins are emerging from their infant stages, becoming more intertwined with traditional finance, meaning that a collapse “could reverberate across the financial system, and the risk of contagion is a growing concern for central banks.”

Schaaf explained that the recent enactment of the GENIUS Act might power the expansion of stablecoin adoption, given the lenient approach regarding compliance. He estimates that the stablecoin market cap might grow from $230 billion in 2025 to $2 trillion by 2028

This explosion can even disrupt the payments ecosystem as major credit companies like Visa and Mastercard are already integrating stablecoins as part of their settlement rails, and major retailers like Walmart and Amazon are exploring their usage.

He assessed that if stablecoins become widely used yield-bearing instruments, they might pose a threat to the dominance of European private banks, given their reliance on customer deposits.

Schaaf declared:

[Stablecoins] could divert deposits from traditional banks, which could jeopardise financial intermediation and hamper credit availability. This would be a bigger issue in Europe, where banks play a central role in the financial system and deposits are their main source of refinancing.

ECB President Christine Lagarde has also rejected the notion of using stablecoins as money, recently stating that their increasing adoption risks depriving actual money of its public good function and giving private parties the ability to set monetary policy.

Read more: ECB President Christine Lagarde Warns Stablecoin Adoption Might Lead to ‘Privatization of Money’