Users could encounter limitations when it comes to store-of-value and transactions through the digital Euro, said an European Central Bank (ECB) executive board member, Fabio Panetta.
Such a comment was made by Panetta in the symposium organized by the European Commission, otherwise known as the Towards a Legislative Framework Enabling a Digital Euro.
Precise restrictions are not yet fixed because the European Central Bank (ECB) is still investigating the digital euro initiative, but Panetta gave hypotheticals of a store-of-value cap of €3,000 and a monthly transactional restriction of 1,000.
Panetta stressed that “If we give access to a means of payment, which is relatively limited, there are no transaction costs because you only need to have a smartphone,” as he went on to say, “There will be risks that people could use this possibility to move, for example, their deposits of other banks or their money out of financial intermediates.”
Panetta said that this would pose a risk to the financial system’s overall stability during times of turmoil, resulting in the ECB considering imposing transaction restrictions for the possible Central Bank Digital Currency.
He noted that even though this is a CBDC, it is not intended to replace the traditional euro, emphasizing that “Digital euro would be an additional option for retail payment — not a challenge to the function of the financial system.”
Panetta further mentioned a transaction limit of €50 while referencing anti-money laundering laws. Nonetheless, the Minister of Finance of Germany, Christian Lindner pushed back by wondering “whether people would accept €50 as they can pay in cash hundreds and more,” further suggesting that they “should introduce a digital euro that is really accepted by people and not only by policymakers.”
By September of next year, the ECB is anticipated to determine whether to proceed with a realization stage. The likelihood of the European CBDC initiative continuing increases as the European Commission is anticipated to make a legislative proposal.