Could stablecoins impact bank lending?

So, I remember when Trump signed the GENIUS Act for stablecoins, and some banks were not happy about it. But later on, others claimed it wouldn't really change anything for them. Now, the European Central Bank is saying that stablecoins might actually weaken bank lending and affect monetary policy in Europe. What’s everyone’s take on this? Make sure to check out what the European Central Bank had to say before chiming in.

That's nothing new. The ECB doesn't want anything to escape state control, which is why it wants to push CBDCs and hates stablecoins, which belong to the private sector. What's more, if you Europeans the freedom to choose a stablecoin, 97% of them choose stablecoins linked to the dollar. The ECB is not an example of anything. It is nothing more than an archaic institution on a decadent continent, where all the measures it takes are designed to maintain the status quo.

Of course, when investors shift their deposits to crypto assets, whether stablecoins or Bitcoin, it will have a significant impact on banks. After all, banks rely heavily on deposits to provide loans to their customers. Doesn't this mean that public confidence in the banking system is gradually starting to collapse? Moreover, seeing the increasing war tensions, this has certainly influenced investors to shift their savings to various forms of investment to secure assets, and crypto is one good alternative. I am quite sure that if a third world war occurs, there will be many major changes, especially in the financial system. But of course, the government will create propaganda to prevent them from losing control of their finances. I'm sure the government will start cracking down on crypto, since they don't have much control over it. Of course for this purpose

I think central banks naturally don’t like losing control and that’s probably the deeper issue here. Stablecoins are private-sector money and people are choosing them voluntarily. The fact that many Europeans prefer dollar-backed stablecoins says more about trust than anything else. Framing it as “weakening bank lending” feels somewhat defensive. If banks lose deposits, they’ll adapt and innovate... that’s how financial systems evolve. At the end of the day, this looks more like a question of influence than pure lending mechanics.

Hmm. I think it's just because it's like bypassing the traditional banking system. In the old days, people had to deposit hard cash, which was kept in a vault or something, and then they put it to work. It is now fully digital, and it has somewhat reduced the deposits coming into the bank from lenders. I think stablecoins' efficiency will be more effective in the future. I just hope it won't depeg and they are transparent with their reserves.

I read the ECB paper. Or at least the summary working paper they put out. The deposit-substitution effect they describe really does exist. People transfer money from the banks to stablecoins. Banks have less cheap funding, have to go wholesale, lending gets more expensive or tighter. That chain of logic holds. Why are deposits leaving? Who decided to leave? And more importantly why did they decide that now and not ten years ago? The euro savings account was giving them nothing of value for years. Negative rates. Inflation Eating Purchasing Power. And banks on the other side of that equation, were still picking up massive lending margins. So when USDT comes along and goes, hey, here, take some dollars, do whatever you're like, no permission need to do so - people move. Obviously they move. The GENIUS Act approach at least acknowledged something - stablecoins exist, people want them. The question is how do they co-exist with existing financial infrastructure, not if they should be allowed to exist. Europe is still the second question. Still asking whether. It's years behind at this point. Theoretically a euro denominated stablecoin by the ECB itself would compete directly with USDT. They are able to return deposits to the influence of monetary policy. But the difference is, people are able to feel when surveillance is built into the design. A CBDC is programmable. It can have expiry dates, spending restrictions, negative rates that are applied directly. People aren't stupid.

This is true, not just for stable coin for for all crypto as a whole. The more people keep their money in these wallets in the form of Bitcoin and cryptocurrencies, the less banks have deposits that they can use to give out loans to businesses. However, that is not our problem; that is the bank's problem. That is exactly what capitalism is. It is my job to look for a better way to keep my things or do business, so if you want me to do business with you, you have to be the better way. They might argue that "Oh, if the banks don't have enough money to give as loans, businesses and companies won't have money to expand and create jobs or innovations that will help the economy". This is also true, but it is not the job of people in the economy to sacrifice their money so the economy can grow. There have to be better incentives for them to give their money to the bank. People don't put their money in the bank simply because they love the economy so much and would love to help it grow. Then, let the banks not act as if they care about the economy. If there were a way that the economy would bleed dry while they profit, they would take it. So the emotional blackmail shouldn't come from them. Profit and a better way to do business are the drivers of the economy in this context. In capitalism, once there is a better alternative and better profit, you either need to level up or wither away. No one should understand this better than the banks and the European Central Bank. They do actually, that is why they have been strongly against the Bitcoin industry.

I will say that the ECB concern is more about being in control than technology itself because of more people move their money frombanks  into stablecoin, it will result to banks not having enough to lend out and with this it will result to central banks struggling to manage the economy with tools like the interest rate and with this the traditional monetary policy will weaken overtime.

What's it got anything to do with bank lending? You still need fiat currency or a tradable asset in order to swap it for a stable coin - it's not given away for free at any sort of scale. People will still borrow money from banks and spend it on all kinds of things. Banks, or probably exchanges first, will find a way to pivot into stablecoin lending if it becomes a profitable endeavor but they won't necessarily be able to get the same kind of leverage that they do now from deposits/lending. It has the room to radically reshape how we use currency today if more stablecoins offered by countries become available and used in place of local currencies, but it still seems like we're years away from that.

they are obviously scared people will stray away from traditional banks. their loans are more often than not really not benefiting to those availing said loans. there are also lending services in stablecoins/crypto so people don’t have anything to worry about.

There would be an easy fix for the banks: issuing their own stablecoins. Simply adapt to the changing market. In Europe, Societé Générale is the main player that did it already. Their stablecoin is called the EURCV. There's another group of banks (Qivalis, including BNP Paribas, ING, UniCredit, BBVA and others) who are on track to create their own stablecoin. Others, like Deutsche Bank, are evaluating it. Of course it is a challenge for them to get a good share in a market that already has very established players (basically Tether and Circle). But they could benefit from the dollar weakness, if it persists perhaps people would consider the euro as a better option. Stablecoin issuers operate very much like banks. I think there is no reason to prefer "new" stablecoin issuers like Tether (many consider them quite shady) over these "old style" banks. And centralized stablecoins are only blockchain-based variants of fiat. Decentralized or semi-decentralized stablecoins like Dai are another story, I see them a bit more positive, but they're a minority market still and it can be doubted if they will be stable forever or somebody discovers a destructive attack against them (like the one that smashed Terra/Luna in 2022). I would not read too much into these questions. A big part may be simply people speculating at the crypto markets. The Tether market cap moved in line with the crypto market in the last cycle (2021-now). The 2022 low was 66 B USD, and it grew to 187 B USD in late December 2025, after the Bitcoin ATH, now being a little bit lower again (183 B). So its x3 growth was very much in line with other major altcoins and lower than Bitcoin's. The main difference is of course that stablecoins keep quite strong in bear markets as they're used to hedge funds against crypto losses, and thus their market cap peak is later than the Bitcoin peak typically. The market share of stablecoins outside of the crypto circles may be growing, but seems still small to me. For example, in this JP Morgan report, the use cases outside of the crypo ecosystem are still described as "emerging".

those traditional banks who refuse to adapt are getting left behind. they almost have no choice but to get into cryptocurrency as well if they want to keep up and maintain their customers and attract new ones. the world is evolving and so should they. their problem is people are losing trust in banks

Who really cares? Stable coins are unofficial fiat and they should be treated like that. I hodl only well established alts and bitcoin so I can’t care less enough about the stable coins. Frankly, they all can eat shit and die. Bitcoin is the king and there is all that matters. If bank lending was so great, everyone would be doing it. People still prefer btc over any stable coin and that tells a story.

Maybe if all customers in banking institutions switch to stablecoins, it is very possible to happen, in my opinion. Especially now that there are other investors who use DeFi platforms where they often put stablecoins in yielding features that have rewards that are given to other assets. Long-term investors who only put funds but have high returns on their capital investment that is put here like this, and then others also use the lending features like banks.

ECB is starting to feeling fear with the existence of stable coin. So i guess the better they to stop rob people. Let's take an example : ECB deposit IR is around 2%, while stable coin deposit IR can vary between 3%, 5%, 7%, or more depending on the strategies and curator. So it's all make sense if they're getting fear people to choose do deposit their money to the stable coin, which offer greater APY instead of keep their money on european bank. It's the reason why they're think stable coin can weak bank lending caused due to how small IR offered by bank compared to the stable coin while it posses the same risk.

Can stable coin weaken bank lending? The short answer is No, why? first of all stablecoin still new in this crypto space and yes it grew but not made a dent in traditional finance that have trillion of dollar and most of our world is running legacy chain haha I mean tradfi and if you take a look at the tether transparency you might notice that tether itself put their money Cash & Bank Deposits, Short-Term Deposits and Secured Loans and last tether give you nothing by holding their stablecoin you didnt pay fee and they didnt get you a interest rate

I think not really. A lot of banks like that are still relevant and I think they can remain like that even without the help of crypto, as there are also many people who are not into crypto that are using them. Adding crypto is only like optional but they might also benefit with it because crypto users like us might consider them to have more convenience when cashing out or buying a crypto. I think the people who lost a trust in the banks are the people who are not really into banks before but discovered Bitcoin and stayed there longer. It is not the banks problem anymore, and it is not also the problem of those people since as they say 'Bitcoin is our bank already' .

I think we need to define the market clearly before we go into this argument. Which countries are we talking about? What's the source for this "losing trust in banks", etc. If you look at my country, then it's far from losing trust in banks. Even if it's true, I don't think it's related directly to their lending power. More like they don't trust banks for long-term storage. The reason is not that they like stablecoin, but more like they put more money into gold.

It only highlights their incompetence. When they see stablecoins like USDT becoming more widely used, they start to worry that their control over more people is being reduced, and they start attacking stablecoins for various reasons. Stablecoins provide more benefits to people, and that's why they prefer to use them. If the ECB feels that this is something that needs attention, then it's their fault for failing to innovate and provide the benefits people need for a long time. People are now more discerning in choosing what's best for them, and the ECB should understand that sooner or later people will switch to solutions that they believe are more beneficial.

True. But why not make a partnership with stablecoin companies instead? Central banks, governments, and stablecoin issuers (companies) can work together to make a system that works best for everyone. Like companies giving "special access" to governments and central banks to do whatever they want with the stablecoin. In the US, President Donald Trump and his Republican base have been pushing an Anti-CBDC agenda, while backing USD-based stablecoins. It's believed such stablecoins will become the "de-facto" USD, serving as the "unofficial" replacement of the current monetary system. Stablecoin transactions can be frozen, just like CBDCs. Not to mention, most of them are highly-visible across public blockchain networks. So the US government will have all it needs to keep Americans' financial lives in-check. The FED (US Central Bank) can still change monetary policy, but the handling of digital payments will be in-charge of private entities (stablecoin companies) instead. In no way will this "weaken" bank lending. Only the ECB thinks so because the EUR is losing ground against the USD in the stablecoins sector. It's why they're so keen in launching their very own "Digital Euro". I hope it never materializes, for the sake of Europeans' privacy.