The threat that so-called stablecoins represent for bank credit, which the Executive Intelligence Review (EIR) has long warned of, is becoming more and more evident, leading both the banking lobby and Central Banks to sound the alarm. The latest to do so is the European Central Bank (ECB), via its Chairperson Christine Madeleine Odette Lagarde.

Speaking at a Spanish Central Bank event on May 8, 2026, Lagarde warned that “in the Eurozone where banks remain the dominant source of credit to the real economy, large-scale deposit substitution (money invested in stablecoins rather than deposited in the bank) would weaken lending to firms and the transmission of monetary policy“. She stressed: “In the US, where firms have broad access to capital markets, this effect may matter less: a contraction in bank lending could potentially be more easily absorbed.”

A crucial question now is whether US regulators will allow stablecoins to carry an interest on deposits. This is seen as potentially attracting deposits from banks into more remunerative stablecoin accounts. One argument used by the stablecoin lobby, including US Treasury Secretary Scott Kenneth Homer Bessent, is that it would reshore the huge amount of capital which is now invested in the Eurodollar market and create a demand for short-term US Treasuries. It is calculated that some 25% of the Eurodollar market could thus be moved, satisfying two years of issuance of Treasuries at the current rate, and stabilising the US debt.

This may be true, but the flip side of the coin is the destruction of bank credit, a necessary pillar, together with government credit, of a healthy economy. Even under the current system of universal banks where financial trading and speculation is dominant, banks still devote a portion of their deposit-based activity to loans to households and businesses.

Take the example of Deutsche Bank, an institution certainly not known for prudent policies: its so-called “trading-related assets” amount to EUR 500-550 billion, and its loans to EUR 480 billion. So, while speculating on stocks and derivatives, DB somehow maintains touch with the real economy, the lower curve in Lyndon LaRouche’s famous “typical collapse function”. If customers are lured into stablecoins, it will erode the basis for bank credit, which is deposits. Loans to the economy will be reduced and bank stability ultimately jeopardised.

Although the current system based on independent central banks is of an oligarchical nature, and was correctly exposed as such by LaRouche, the oligarchy is now pushing a mutation of its own system into an even worse one. The crisis opened by this mutation offers a choice: if the banking system is to survive, it has to go back to a regulated, Glass-Steagall-like system of bank separation. Such a reform would save commercial banks, while sinking the entire speculative part of the financial system, including the utopian stablecoin/crypto faction.

Read: Euro Stablecoins could become the EU’s best defense against Dollar dominance

This article was first published in Executive Intelligence Review (EIR) Strategic Alert weekly newsletter (Volume 40, No. 20) on May 14, 2026.

Meanwhile,

Boundless Ocean of Politics on Facebook

Boundless Ocean of Politics on Twitter

Boundless Ocean of Politics on Linkedin

Contact us: kousdas@gmail.com

Published by Koushik Das

Koushik Das (born on May 16, 1976 in Kolkata) is a career journalist. Based in the Indian capital of New Delhi, Koushik writes mainly about foreign policies and current geopolitical issues, and rarely about other topics. His own political ideas are highly influenced by Antonio Gramsci, Louis Althusser, Michel Foucault, Michael Oakeshott and others. English philosopher and political theorist Oakeshott (Dec 11, 1901-Dec 19, 1990) says that “in political activity, men sail a boundless and bottomless sea. There is neither harbour for shelter nor floor for anchorage, neither starting-place, nor appointed destination. But we have to keep afloat”. (Rationalism in Politics, 1962) As a student of Political Science, Koushik loves to share his views on issues, which have great impacts on his thought process (and also on India, South Asia and of course on the global community), with his readers through his website – Boundless Ocean of Politics. By doing so, he tries to keep himself afloat. You will find some of his articles in https://inserbia.info/today/ (https://inserbia.info/today/author/kou_das13_i/), as he has been trying to assess the global geopolitics since 2003. You can also mail him at kousdas@gmail.com View all posts by Koushik Das