ECB to Limit Digital Euro Use and Storage
The European Union’s central bank digital currency (CBDC) may have a certain use and storage limit for users.
At a conference organized by the European Commission and the European Central Bank (ECB), “Towards a legislative framework enabling a digital euro,” several proposals were considered as part of the digital euro’s development.
Fabio Panetta, Executive Board Member of the ECB, proposed restrictions on using the European CBDC. He said such a move could significantly reduce risks to financial stability, as limitations on using digital currency would also cut transaction costs.
Panetta stressed that the development of the EU digital currency is primarily focused on creating an “additional option for retail payment.” And the ECB is by no means seeking to replace cash with CBDCs. That’s why the limits, which will be spelled out in the digital euro’s structure, are necessary.
So, according to Panetta, the ECB mentioned 3,000 digital euros as an example store-of-value limit and 1,000 transactions as a monthly limit. Panetta also referred to the possibility of limiting one-time transactions to 50 digital euros.
However, this initiative was challenged by some conference participants. For example, Christian Lindner, German Minister of Finance and G7 Chairman, expressed his concern that introducing limits would lower the interest of EU citizens in digital currencies. He particularly emphasized the limit on one-time transfers, which should be adapted to users’ needs. Lindner thus urged the ECB to do more research on demand before deciding on limits.
Another conference participant, Christine Lagarde, President of the ECB, said the bank was willing to consider legislative options for CBDCs. She said the further development of the digital euro must have legal certainty that would foster political support and increase confidence in the digital currency. Developing a legislative framework for CBDCs is entrusted to the European Commission. Lagarde specified that the ECB representatives were ready to cooperate in this matter.
It’s worth noting that Queen Máxima of the Netherlands attended the conference. She admired the work done by the ECB in developing the digital euro, stressing that policy reforms will be necessary before implementing the CBDC.
The Queen Consort also highlighted that public sector representatives should strive to make the financial system open to the needs of EU citizens. According to Máxima, the digital euro must work for all Europeans.
Recall that the development of the European CBDC is in progress. The ECB plans to present the first results of the pilot project in 2023. In this case, the main developments are underway to ensure peer-to-peer payments between EU citizens through the digital euro. Moreover, it was recently reported that the ECB started working with Amazon to develop user interfaces for the future CBDC.