Shares of Coinbase slipped 1.75% to $157 while Circle’s stock lost 6% over five sessions, reflecting investor concerns tied to stablecoin adoption impacting the banking sector. This market reaction followed remarks by Piero Cipollone, a European Central Bank executive board member, who warned that expanding stablecoin use could drain deposits from conventional banks.
Stablecoins and the Bank Deposit Drain
During a July 17 speech in Rome at the Federation of Cooperative Credit Banks, Cipollone linked the rise of stablecoins with a potential decline in traditional bank deposits. He argued that as consumers increasingly prefer stablecoins, their willingness to keep funds in regular bank accounts may diminish. This shift threatens banks’ role in financial intermediation and credit provision.
In response, Cipollone urged the European Union to accelerate the rollout of the digital euro. He views a central bank digital currency as a necessary counterbalance to privately issued stablecoins, aiming to preserve the stability of the banking system and reduce reliance on tokens issued by private entities.
This European perspective echoes concerns voiced by US banking groups amid ongoing debates over the CLARITY Act. These groups have lobbied for amendments to restrict stablecoin issuers from offering interest or rewards through affiliated entities, fearing such incentives could lure deposits away from community banks and impair their lending capacity.
Circle, issuer of the USDC stablecoin, is particularly vulnerable. Regulatory limits on yield offerings could directly impact how exchanges and partners promote USDC, contributing to Circle’s shares sliding to a pre-market low of $58 on July 17, their lowest since February 2026, before a mild recovery to $60.46. Despite Cathie Wood’s ARK Invest buying $15.4 million in Circle shares, sentiment remains fragile.
Alongside regulatory uncertainty, Coinbase faces risks from potential US market rule changes that could reduce revenue streams tied to stablecoins, institutional services, and trading activity. Compass Point analysts maintain a sell rating on Coinbase with a $140 price target, highlighting that the stock’s performance heavily depends on the CLARITY Act’s passage. Failure to pass could depress Coinbase shares further, even more than the impact of upcoming second-quarter earnings.
The legislative dynamics around stablecoins are thus not only shaping crypto regulations but are beginning to exert tangible pressure on major crypto exchanges and issuers, signaling a key moment for market participants balancing regulatory risk and growth opportunities.
