ECB Board Member discusses setting limits on individual holdings for Digital Euro

In a recent address to the EU’s Committee on Economic and Monetary Affairs, Fabio Panetta, a Member of the Executive Board of the European Central Bank (ECB) discussed some of the design challenges for a digital Euro.

Panetta noted that, in the ECB’s view, it would be essential to design a digital euro with in-built tools to ensure that it would not be used “as a form of investment rather than solely as a means of payment”.

In particular, Panetta said the ECB intends on:

1. placing quantitative limits on the number of digital euro individuals could hold and
2. discouraging the use of the digital euro as an investment.

Quantitative Limits

The ECB board member said that the bank’s preliminary analysis suggested maintaining digital euro holdings at around 1-1.5 trillion would “avoid negative effects for the financial system and monetary policy”. This would translate into holdings of between 3000 – 4000 digital euro per capita.

Discouraging Investment

Europe’s central bank also plans to discourage the use of the digital euro as an investment. They aim to do so by applying “disincentivizing remuneration” for holdings above a certain amount. It’s not clear what this would actually look like in practice and whether it would involve the application of negative interest, however, Panetta did say that larger holdings would be “subject to less attractive rates”.

See Also

Aptos Announce Partnership with Microsoft

In his speech to the committee, Panetta also voiced his skepticism regarding cryptocurrency, saying it fails as a means of payment due to it being “slow and expensive”. He reiterated the need to close any “regulatory gaps”, citing the recent meltdown of algorithmic stablecoins as one of the justifications to tightly regulate the crypto-asset ecosystem.

Learn more about the coming regulation of crypto in the European Union:

• What is the MiCA Regulation and how will it impact crypto?