ECB: stablecoin risks; Iran outflows surge; US crypto bill stalls
Key developments in crypto today include a European Central Bank working paper warning that wider stablecoin adoption could weaken bank lending and monetary policy transmission in Europe; a sharp spike in crypto outflows from Iran-based exchange Nobitex following U.S.-Israeli airstrikes in Tehran; and continued uncertainty over whether U.S. lawmakers can pass digital asset market structure legislation before November’s midterm elections.
Stablecoins could weaken bank lending and monetary policy in Europe: ECB
The European Central Bank said increased use of stablecoins may shift funds out of bank deposits and dampen the transmission of monetary policy to credit conditions, according to a new working paper.
The paper, “Stablecoins and Monetary Policy Transmission,” released Tuesday, links rising interest in stablecoins—digital assets often pegged to fiat currencies such as the U.S. dollar or euro—to a measurable decline in retail bank deposits and a reduction in lending to firms, indicating potential constraints on credit to the real economy, ECB staff said.
The ECB noted the effects are nonlinear and depend on the extent of stablecoin adoption, their design features, and applicable regulations.
The report is part of the ECB’s monitoring of stablecoins, whose market capitalization has more than doubled over the past three years to $312 billion and is projected to reach $2 trillion by 2028.
The paper added that banks rely on deposits as a stable, low-cost funding source to support lending. If deposits decline, banks may turn to wholesale or market-based funding, which is typically more expensive and less stable.
Actual and expected stablecoin market development. Source: ECB (Citigroup, Coinbase, JPMorgan)
Iranian crypto outflows spike 700% after U.S.-Israeli airstrikes
Iran’s largest crypto exchange, Nobitex, recorded a significant jump in withdrawals within minutes of U.S. and Israeli strikes in Tehran on Saturday, according to blockchain analytics firm Elliptic.
Elliptic reported that outflows from Nobitex surged by more than 700% to over $500,000 shortly after the initial strikes, with data showing outflows reached nearly $3 million in a single hour later that day.
The firm said the pattern may indicate capital flight from Iran, with initial tracing suggesting many of the funds moved to foreign crypto exchanges to facilitate transfers out of the country while sidestepping some scrutiny associated with the global banking system.
Outflows from Nobitex fell sharply after Saturday, which TRM Labs attributed to government-enforced internet blackouts. TRM said Iran’s internet connectivity declined by approximately 99% shortly after the conflict began.
Crypto outflows on Nobitex from late February to March 1. Source: Elliptic
Can U.S. lawmakers pass crypto market structure before the midterms?
Despite ongoing Senate efforts since July to advance a comprehensive digital asset market structure bill, some industry observers in Washington say momentum may be on hold due to legislative gridlock.
After the House passed the CLARITY Act last summer and sent it to the Senate, progress has been slowed by a historically long government shutdown, partisan disputes over ethics, and debates over stablecoin yields, with the timeline further constrained by the U.S. midterm elections in November.
Eight months ahead of the midterms, a commodities-focused version of the market structure bill has advanced through the Senate Agriculture Committee, while the Senate Banking Committee has yet to take up a securities-focused measure after canceling a markup in January.
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