The European Central Bank (ECB) has previously said it will set the holding limits for the digital euro based on the economic situation when the central bank digital currency (CBDC) is launched. It’s been working on a methodology for the calculation, which is a pretty complicated task, as we’ll come to. Holding limits are a contentious issue.
In the very early days of discussions about the digital euro, the central bank proposed a holding limit of around €3,000. If someone receives an amount pushing them over the limit, the digital euro wallet would sweep the excess amount into their bank account as a ‘waterfall’. If they want to spend more than €3,000 using the CBDC, the additional money comes from their bank in a reverse waterfall.
The topic is contentious at multiple levels. Late last year reports emerged that nine European states are not keen for the ECB to set the limits, including France and Germany. A big part of that is a concern that the ECB will set the limit too high and negatively impact the banking system. Income levels differ significantly between countries, so arguably one might want local limits, but that goes against the whole union angle.
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