ECB’s Executive Board Emphasizes Need For Planned Digital Euro Launch

• It is conceivable to prevent the digital euro from being used as an investment option.
• Panetta said it would take years until the majority of Europeans own the digital euro.

Member of the European Central Bank’s Executive Board Fabio Panetta cautioned that a digital euro might convert a considerable percentage of bank deposits in the euro region into digital money. A central bank digital currency (CBDC) might pose a significant financial and monetary danger to the euro area’s banks, according to Panetta, who noted that the authority is taking a serious look at the concerns.

Panetta stated:

“If not well designed, a digital euro could lead to the substitution of an excessive amount of these deposits. Banks can respond to these outflows, managing the trade-off between funding cost and liquidity risk.”

Digital Euro’s Implementation as Simple as Possible

According to Fabio Panetta, it is conceivable to prevent the digital euro from being used as an investment option instead of a payment method. Quantitative constraints on individual ownership will be one of the ECB’s options, he said. European financial markets and monetary policy might be protected by keeping the total amount of digital euro holdings in the range of one to one and a half trillion.

The banker further stated:

“In terms of existing banknote reserves, this would be in line with what is now in circulation. According to recent estimates, the Eurozone’s 340 million-plus inhabitants might contain as much as $3,000 to $4,000 in digital currency.”

Panetta said it would take many years until the majority of Europeans own the digital euro to accomplish the monetary authority’s goals in this respect. In addition, an ECB official said that the ECB would strive to make the digital euro’s implementation and user experience as simple as possible.

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