Fabio Panetta, a European Central Bank (ECB) executive board member, spoke about design considerations for a potential digital euro in a speech yesterday. Preliminary analysis indicates the central bank would limit the total central bank digital currency (CBDC) issuance to €1-1.5 trillion ($1.56 trillion). This would help preserve financial stability and reduce bank deposit substitution with holdings limited to €3,000-4,000 per person.
The central banker also revealed the ECB is considering offering interest on the digital euro. The rate would vary with a lower interest rate earned on larger deposits. This should help with “disincentivizing remuneration above a certain threshold” and discourage the use of the digital euro as an investment.
In contrast, many other countries considering a CBDC treat it more like cash with no interest accruing. However, final decisions will be made by the ECB closer to the time of issuance if a digital euro formally gets the go-ahead.
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