ECB stablecoin warning knocks Coinbase 1.75% and Circle 6% lower

European Central Bank board member Piero Cipollone warned that wider stablecoin use would drain retail deposits from commercial banks, sending Coinbase Global Inc. shares down 1.75% to $157 and Circle Internet Group Ltd. down 6% to near $60.

"If the use of stablecoins increases in the future, banks will also lose retail deposits," Cipollone said Friday at the annual meeting of Italy's Federation of Cooperative Credit Banks in Rome. The warning echoes concerns raised by US banking groups over the CLARITY Act's stablecoin yield provisions.

Coinbase shares fell to $157, with the Chaikin Money Flow reading at -0.05 and the MACD line negative, signaling sustained selling pressure. Circle touched $58 during pre-market trading on July 17, its lowest since February 2026, before recovering to $60. The global stablecoin market stands at roughly $300 billion, almost entirely dollar-denominated, per DefiLlama data.

The ECB has named 36 payment providers — including Deutsche Bank, UniCredit and Revolut — for a 12-month digital euro pilot starting in the second half of 2027, after the European Parliament voted 416-169 to begin formal legislative negotiations. In the US, the CLARITY Act's Section 404, which would allow stablecoin issuers to offer yields, has drawn opposition from banking groups who warn it could trigger deposit flight from small banks. The bill has a 69% probability of passing before the August recess, according to betting markets.

Cipollone framed the digital euro as the structural answer to the deposit risk. The central bank digital currency would let customers open accounts at their commercial banks and pay across the euro area in shops, online and person-to-person. Holdings would carry no interest, and calibrated limits would cap wallet balances, giving users little reason to move large sums out of the banking system. The ECB's own financial stability analysis concluded the design poses no material risk to bank liquidity.

The warning follows a regulatory shakeout in Europe's stablecoin market. Tether skipped Markets in Crypto Assets authorization after the transition period closed on July 1, leading to USDT being pulled from regulated EU exchange order books. A bank consortium called Qivalis — grouping ING, UniCredit, BNP Paribas, CaixaBank and BBVA — is preparing a MiCA-compliant euro stablecoin backed one-to-one, with at least 40% of reserves in bank deposits.

Analysts see further downside for both stocks. Compass Point warned that Coinbase could fall to $140 if the CLARITY Act does not pass, while Oppenheimer trimmed its price target to $209, citing weak trading volumes on the exchange. Mizuho forecast Circle shares could drop to $50, warning that the new OpenUSD stablecoin may erode Circle's market share. ARK Invest purchased $17 million of Circle shares during the selloff, according to recent filings.

The broader payments infrastructure in Europe compounds the structural challenge. Two-thirds of card payments in the euro area now run on non-European schemes, and 13 of the bloc's 21 countries lack a national card scheme, leaving the region reliant on payment rails it does not control.

This article is for informational purposes only and does not constitute investment advice.