By Reuters

(Reuters) - The spread of stablecoins in the euro zone could weaken the effectiveness of monetary policy, siphon deposits away from ‌banks and reduce lending to the real economy, a study published by ‌the European Central Bank showed on Tuesday.

Stablecoins, crypto assets designed to maintain a stable value, remain ​niche but their rapid growth has raised concerns that regulation is not keeping pace with a product that could reshape commercial and central banking.

For traditional lenders, the key issue is that the growing use of stablecoins may lead customers to move money ‌out of bank deposits, forcing ⁠lenders to obtain more expensive funding in the market.

"In other words, stablecoins can reduce the amount of credit banks provide to ⁠the real economy," the paper, written by ECB economists, said.

However, euro area bank deposits still total about 17 trillion euros ($19.7 trillion) while the global stablecoin market is roughly $300 ​billion, suggesting ​that banks are not yet facing any ​sizable deposit hit.

For the ECB, ‌a key problem is that most stablecoins are issued in dollars, a currency it does not control.

If dollar-based assets gain wider use in Europe, policy moves outside the bloc could affect liquidity and spending conditions, diluting the ECB's influence.

"Foreign monetary conditions could be 'imported' into the euro area through stablecoins," the paper said, adding that ‌that would weaken the central bank's control over ​financial conditions, among other things, especially during periods ​of financial stress.

A hit to ​banks would also weaken the ECB, as the euro zone ‌economy relies on lenders to transmit interest ​rate changes to ​the real economy, the economists said, adding that would make the impact of policy moves less predictable.

These risks call for meaningful regulation of stablecoins, such ​as stronger transparency requirements ‌for stablecoin reserves, robust redemption guarantees, adequate capital buffer to absorb losses ​and effective oversight can reduce financial risks, it said.

($1 = 0.8627 euros)

(Reporting ​by Balazs Koranyi; Editing by Nivedita Bhattacharjee)

This week on Reuters

• Dell shares jump on forecast it will double AI server revenue

• How investors buy gold and what fuels the market

• CoreWeave shares slump as doubling capital expenditure sparks margin concerns

• Hedge funds creep back into tech stocks after weeks of selling