TechFlow News, March 3: According to a report by Cointelegraph, a new working paper released by the European Central Bank (ECB) on Tuesday indicates that growing stablecoin usage is diverting funds away from bank deposits, thereby weakening the transmission of monetary policy to lending.
The study finds that rising interest in stablecoins correlates with a marked decline in retail bank deposits and a reduction in corporate lending. As deposits shrink, banks may be forced to rely more heavily on wholesale or market-based funding—which tends to be costlier and less stable. The ECB notes that the extent to which stablecoins disrupt monetary policy transmission channels depends on their scale of adoption, design features, and regulatory framework. In particular, stablecoins denominated in foreign currencies could further weaken the link between domestic monetary policy and bank lending.
