The European Central Bank continues to debate the holding limit for the digital euro.

The European Central Bank is advancing the development of the digital euro, with a focus on holding limits that balance convenience and financial stability.

The European Central Bank (ECB) is at a crucial stage in the development of the digital euro, a central bank digital currency (CBDC) that It is designed to modernize payments in the eurozone, complementing both physical cash and existing electronic payment methods. 

Through the digital euro, the ECB aims to offer a secure and accessible option for making everyday payments, both online and in physical stores. However, one of the most controversial aspects of its development is the definition of a holding limit for this new form of currency.

The decision on the holding limits for the digital euro is crucial, as it could impact both users and the European financial system. While some propose low limits to protect commercial banks, others advocate for higher limits to encourage citizen adoption. This debate reflects the tensions between the need for technological innovation and the preservation of economic stability. 

Digital Euro: How Much Can You Have?

One of the central issues in the design of the digital euro is the individual holding limit. The ECB has considered figures ranging from 1.000 and 10.000 euros, although no definitive consensus has been reached. This range reflects the tensions between two main objectives: ensuring a positive user experience and preserving the stability of the banking system.

On the one hand, a low limit, such as 500 euros, could minimize the impact on bank deposits and protect commercial banks' lending capacity. However, this figure could prove insufficient for many users, who would have to constantly resort to transfers from their bank accounts to make larger payments, limiting the convenience of the digital euro.

On the other hand, a high limit, close to 10.000 euros, would allow most people to make everyday payments without significant restrictions. However, the bank believes this could lead to a massive flight of bank deposits to the digital euro, negatively impacting commercial banks' profits. According to a report commissioned by the European Banking Federation, if 40% of consumers adopted a limit of 3.000 euros, annual losses for banks could amount to 8.800 billion euros.

The impact of the digital euro on banks and consumers 

The design of the digital euro not only affects its potential direct users, but also the European financial system as a whole. Commercial banks have expressed significant concerns about how this new form of money could disrupt their traditional business model.

Bank deposits are a key source of funding for lending to consumers and businesses. If a substantial portion of these deposits move to the digital euro, banks could struggle to maintain competitive rates on their loan products. This could have a ripple effect on the European economy, making access to credit more expensive and slowing economic growth.

To mitigate these risks, the ECB has been exploring solutions that help balance the benefits of the digital euro with the need to preserve the essential economic function of commercial banks.

Public perception and the challenge of accepting the digital euro

Public acceptance of the digital euro is another crucial factor in its potential success. According to a poll According to the recent ECB survey, although 63% expressed initial interest in using this new digital currency, only 31% were willing to actively adopt it after learning more details about how it works.

One of the experiments conducted during the preparatory phase included showing explanatory videos about the digital euro to selected groups. The results indicated that those who watched these videos were more likely to consider using it. However, this positive effect diminished over time, underscoring the importance of ongoing educational strategies to encourage adoption. 

Another interesting finding in the ECB survey was how people planned to use a hypothetical €10.000 prize. While only 27% were willing to allocate part of the money to the digital euro, much larger numbers preferred to keep it in cash or traditional bank accounts, between 55% and 82%, respectively, according to the survey. These results reflect a widespread lack of trust or understanding about the specific advantages of the digital euro compared to other traditional forms of money.

Key decisions pending

The European Central Bank (ECB) has set a date for October of this year to decide on the digital euro. Discussions remain on its technological operation and measures to ensure offline transactions and interoperability with existing systems.

ECB President Christine Lagarde has emphasized that the digital euro is a modern alternative to cash, neither replacing it nor competing with commercial banks. However, decisions require a balance between technical evidence and stakeholder consultations.

In conclusion, the digital euro faces challenges such as balancing innovation with financial stability and ensuring public acceptance. As October approaches, it will be crucial to watch how this dialogue evolves, as decisions will have profound implications for Europe and the global financial landscape.

Investing in cryptoassets is not fully regulated, may not be suitable for retail investors due to high volatility and there is a risk of losing all invested amounts.