Bundesbank President unsure on digital euro’s holding limits

Bundesbank chief Joachim Nagel says no decision has been made thus far regarding holding limits for a digital euro.

The European bloc has yet to determine the parameters of holding limits for a potential digital euro, as Bundesbank president Joachim Nagel indicated that no final decision has been made so far. During his speech in Rome, Nagel said no consensus on this matter has been found, adding that “the jury is still out here,” as per a Bloomberg report.

The Bundesbank president went on to say that initially, economists at the European Central Bank (ECB) suggested that a holding limit of €3,000 in a digital euro per person “would be successful in containing the impact on bank liquidity risks even in extremely pessimistic scenarios.”

However, analysts at Bundesbank found that the “optimal amount” could be in the range of €1,500 to €2,500 in digital euro per person, Nagel said, without elaborating on the rationale for advocating lower limits. While the ECB has moved its digital euro pilot to the next stage with potential issuance in the coming years, final decisions on its launch are still pending.

Speaking at Money20/20, Evelien Witlox, digital euro director at the European Central Bank, highlighted the ECB’s intention to proceed cautiously with a digital euro, even as pressure mounts from the decline in cash usage and the emergence of alternative currencies and digital payments.

The digital euro would become legal tender if issued, allowing the general public to use central bank money for everyday transactions. This would be a potential benefit for citizens, as merchants offering digital forms of payment would be required to accept the digital euro, Witlox said.