Debate Over Digital Euro Holding Limits Intensifies
Joachim Nagel, President of Germany’s Bundesbank, addressed the ongoing debate surrounding the digital euro’s holding limit.
Europe’s proposed central bank digital currency (CBDC). Speaking at the Vigoni Lecture in Rome, Nagel highlighted potential benefits of the digital euro in enhancing European unity and modernizing financial systems. He acknowledged concerns that unrestricted digital euro holdings could amplify financial stability risks, suggesting that limits could mitigate these risks. According to recent Bundesbank research, an optimal holding limit of 1,500 to 2,500 digital euros per person may be advisable. Nagel also referenced ECB economists’ recommendation of a 3,000 euro cap, emphasizing that such limits could prevent excessive withdrawals during banking crises, thereby safeguarding against systemic risks.
He outlined several advantages of the digital euro, including adapting to digital payment trends, reducing reliance on non-European systems, fostering innovation in private sector payments, ensuring privacy, and unifying the eurozone through a common digital payment method. Nagel concluded that the digital euro could also stabilize financial systems by moderating bank leverage during normal economic conditions.
Clever Robot News Desk 26th June 2024
Related Article
