Piero Cipollone rattles Coinbase and Circle with stablecoin just put a very familiar crypto fault line back in the spotlight: stablecoins may be useful, but if they start behaving like better bank deposits, banks are going to push back hard. The European Central Bank executive board member warned in Rome that wider stablecoin adoption could weaken traditional deposits, and he made the case for moving faster on the digital euro.
- ECB warning: stablecoins can pressure bank deposits
- Digital euro push: Europe wants public digital money
- US pressure: Coinbase and Circle face legislative risk
- Market strain: analysts see downside for both names
Cipollone gave the warning on July 17 at the Federation of Cooperative Credit Banks in Rome. His point was simple: if consumers shift more money into stablecoins and less into ordinary bank accounts, banks could lose a funding source that helps support lending.
That is not some abstract policy gripe. Deposits are the cheap, sticky fuel of the banking system. When money leaves bank accounts, lenders have to replace it with more expensive funding or cut back on credit. Not every outflow hits lending the same way, but the concern is real enough that both central bankers and commercial banks have been hammering it for months.
Stablecoins sit right in the middle of that tension. They are crypto tokens built to hold a stable value, usually by tracking the US dollar or another fiat currency. Traders like them because they are far less volatile than bitcoin or ether. Payment users like them because they move quickly across blockchains. Regulators dislike them because once a private token starts looking like cash, the plumbing of the financial system gets messy fast.
Cipollone’s answer was to speed up the digital euro. The European Central Bank has been working on a central bank digital currency that would function as cash-like public money, not a speculative asset and not a yield product with a prettier wrapper. The ECB’s own timeline says that if EU co-legislators adopt the regulation this year, pilot exercises and initial transactions could begin as early as mid-2027, with first issuance potentially arriving in 2029.
That timeline matters. This is not a “launch next quarter and moon the payments industry” situation. It is a long policy build, which is probably what you want when the subject is sovereign money and the banking system rather than a memecoin with branding.
The ECB is not just reacting to stablecoins out of reflex. It has a broader complaint about Europe’s payments setup: the region still leans too heavily on non-European providers, and it lacks a seamless pan-European digital payment rail. From that perspective, the digital euro is not only a defense against private stablecoins. It is also a sovereignty project.
In plain English, Europe wants its own digital money rail before someone else writes the rules and takes the fees.
The same worry is showing up in the United States. Banking groups have been pushing lawmakers during negotiations over the CLARITY Act, a crypto market-structure bill in the Senate. Their complaint is that interest-bearing stablecoins, or stablecoins with rewards routed through affiliated firms, could pull deposits away from community lenders and weaken credit provision.
That is the kind of argument banks make when something threatens their moat. Sometimes it is self-serving. Sometimes it is correct. Stablecoins are not automatically evil, but if they start offering yield-like economics and become a default parking spot for dollars, they can absolutely compete with deposits. The issue is not “crypto bad, banks good.” The issue is what happens when private digital cash starts acting like a better money market account.
That also explains why the EU and the US are having these debates at roughly the same time. Stablecoins are useful settlement tools, especially in crypto markets and tokenized finance. But once they scale up, they stop being just a niche rail for traders and start becoming a policy problem. That is when the fun ends and the paperwork begins.
On the market side, Coinbase and Circle are both feeling the pressure from that policy fog.
Coinbase has been trading under a cloud of legislative uncertainty, with analysts flagging the CLARITY Act as a bigger near-term driver than the company’s second-quarter earnings due on July 30. Oppenheimer lowered its Coinbase price target to $209, citing weak trading volumes. Compass Point went further and said COIN could fall to $140 if Congress fails to pass the bill.
That may sound like Wall Street fortune-telling dressed up in a tie, and in some cases it probably is. But the underlying point is fair: Coinbase is highly exposed to trading activity, regulatory clarity, and the broader direction of US crypto policy. If volumes stay soft and Washington keeps dragging its feet, the stock has plenty of room to stay under pressure.
Circle is facing a different kind of squeeze. As the issuer of USDC, it sits at the center of the stablecoin economy and depends heavily on the economics of the reserves backing that token. In simple terms, Circle earns most of its money from the interest on the assets held behind USDC. That makes competition over distribution and reserve income a big deal, not just a chart-watching exercise.
According to CoinDesk, Mizuho Downgrades Circle to Underperform, Cuts Price Target to $50 from $85, warning that a new OpenUSD stablecoin could alter Circle’s business model. CoinDesk also reported that OpenUSD was unveiled by the Open Standard consortium and has more than 140 partners, including Mastercard, Stripe, Coinbase, and BlackRock.
That is not a throwaway launch with a slick website and a couple of logos slapped on top. It is a serious consortium, and the whole point of a consortium in finance is usually to control the economics before someone else does. If OpenUSD really gains traction, the competitive threat is not just another stablecoin on a long list. It is a bid to reshape who gets the yield, who gets the users, and who gets squeezed.
That is why Circle’s business model is drawing so much attention. USDC is one of the biggest dollar-backed stablecoins in crypto, but its economics are vulnerable if users, exchanges, or partners shift toward newer networks that split reserve income differently. In other words: stablecoins are not just about payments. They are about rent collection, and everyone wants a cut.
There is a bigger irony here too. Stablecoins are usually sold as neutral, efficient, permissionless financial primitives. In practice, they are becoming corporate battlegrounds. The marketing says “open finance.” The reality is often “who gets paid, who gets the users, and who gets to keep the yield?”
For traders, the stocks are also sitting near levels that matter technically, but those chart signals should not be treated like prophecy. They are just one way market participants try to read momentum and support. Useful? Sure. Gospel? Absolutely not.
More importantly, the policy backdrop is doing most of the heavy lifting here. The ECB is warning that stablecoins could matter enough to threaten bank funding. US banks are trying to preserve deposits. Coinbase wants a clearer rulebook. Circle wants to protect USDC’s economics. And all of it is happening while lawmakers argue over what crypto should be allowed to do, and who gets to make the rules.
The honest takeaway is that both sides have a point. Banks are right that deposits matter, and a large enough shift into stablecoins can create real pressure on credit provision. Crypto supporters are also right that the current system is slow, fragmented, expensive, and often hostile to innovation. The answer is not to pretend stablecoins are harmless digital coupons. It is also not to let incumbents freeze the system in place forever because competition makes them sweat.
Modernising Central Bank Money: The Digital Euro and Europe’s answer is the digital euro. America’s answer is still being fought over in Congress. And in the middle, stablecoin issuers like Circle are learning a hard lesson: once your product starts looking like money, everyone from central bankers to bank lobbyists starts caring a lot more about your business model.
Key takeaways
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Why is Cipollone worried about stablecoins?
Because if people keep more money in stablecoins and less in bank accounts, banks can lose deposits, and deposits are a core source of lending fuel. The risk becomes sharper if stablecoins offer yield or start acting like a primary store of value. -
Why does the ECB want a digital euro?
The ECB wants a public digital payment option that keeps central bank money relevant in a tokenized economy and reduces Europe’s dependence on non-European payment providers. -
What does the CLARITY Act mean for Coinbase?
It could shape the US crypto rulebook. If the bill stalls or gets watered down, Coinbase could remain stuck in regulatory uncertainty, and that can weigh on trading activity, sentiment, and valuation. -
Why is Circle under pressure?
Circle’s USDC business depends heavily on reserve-income economics, and new competition like OpenUSD could squeeze those economics and challenge its market share. -
Should investors trust analyst price targets?
Use them as context, not gospel. Targets like $140, $209, or $50 can help frame sentiment, but they are still educated guesses, not guarantees.
Further reading
A few related resources for the policy wonks, stablecoin watchers, and anyone tracking where the real pressure is building.
- House Bill 3633 text on Congress.gov
- CNBC: Circle jumps nearly 20% on Clarity Act compromise
- Stablecoin rules near deadline as Circle and Coinbase face pressure
- Circle moves $4.4B USDC to Coinbase in record HyperEVM transfer
- Tether and Circle mint $1.75B in stablecoins to counter the October 2023 crypto crash
