ECB Economists Suggest Restricting Access to Digital Euro to Protect Banks – Bitcoin News Finance


A group of economists who have assessed the potential effects of the digital euro insisted that restricting access to the upcoming currency is necessary to preserve the current financial system. Their study follows an earlier proposal to limit digital euro deposits at the European Central Bank (ECB) to 3,000 euros per person.

The limited availability of the digital euro is expected to prevent it from becoming very popular

Europeans’ access to the digital euro should be restricted to prevent capital flight from deposits in commercial banks, according to a report published by the European Central Bank. The paper It was produced by a team of experts led by Frank Smits who heads the regulator’s General Directorate of Economics.

Economists have attempted to predict the impact of a central bank digital currency (CBDC) on the banking sector in Europe. In the absence of empirical data, they took into account the public reaction to the news about the European Central Bank’s plans to issue a digital version of the European single currency.

As part of their study, published by the Monetary Authority on Thursday, the authors concluded that the optimal amount of a digital euro in circulation should be between 15% and 45% of the eurozone’s quarterly real GDP (real GDP), inflation-adjusted economic output. .

This calculation follows an earlier suggestion that central bank digital currency accounts should be capped at €3,000 per person ($3,070 at current exchange rates). This limit, proposed by ECB Governing Council member Fabio Panetta to ensure there is enough paper money to support lending, is roughly in the middle of the range, at 34%.

If an ECB digital currency was issued without quantification, the amount of digital currency in circulation would be much greater, potentially reaching 65% of the eurozone’s quarterly real GDP. The researchers say this will have greater impacts on banks’ valuations and lending.

Economists at the European Central Bank based their analysis in part on public statements by European officials regarding the design of the digital euro. In June, Panetta said that maintaining total euro digital holdings between 1 and 1.5 trillion euros would help avoid potential negative effects on Europe’s financial system and monetary policy.

He also indicated that this total can be compared with the current holdings of banknotes in circulation. The population of the Eurozone countries is currently around 340 million, and this would allow holdings of between 3,000 and 4,000 digital euros per capita.

In mid-July, European Central Bank President and President Christine Lagarde noted in an article that the investigation phase of the CBDC project would take at least another year, but also outlined some key principles in its realization that she considers already clear.

The two bankers said broad acceptance, ease of use, low costs, high transaction speed, security and consumer protection are features that users will appreciate, and promise that the digital euro will be a more efficient payment tool than cryptocurrency.

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banks, banks, cap, cbdc, central bank, circulation, deposits, digital currency, digital euro, european central bank, economists, financial system, lending, limit, paper, report, restrict, study

Do you expect the European Central Bank to limit the circulation of the digital euro? Share your thoughts on the topic in the comments section below.

Lubomir Tasev

Lubomir Tasev is an Eastern European technologist who likes to quote Hitchens: “Being a writer is what I am, not what I do.” Besides crypto, blockchain, and fintech, international politics and economics are two other sources of inspiration.

photo credits: Shutterstock, Pixabay, Wiki Commons, Yavuz Meyveci



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