ECB’s Panetta Floats 3,000-Euro Limit on Digital Cash
(Bloomberg) -- Euro-area residents’ holdings of a future digital currency could be limited to 3,000 euros ($3,633) to prevent bank runs, European Central Bank Executive Board member Fabio Panetta suggested in an interview with Germany’s Spiegel.
Panetta insisted fears that digital currency initiatives could lead to systemic instability by offering consumers the safer alternative of storing money directly with the central bank were unfounded due to precautionary measures.
“We could allow stocks of digital euros only up to a certain limit, or use interest to make them unattractive above this amount,” he said in an interview with the magazine. “The limit could be around 3,000 euros. That would be far more than most people’s cash needs today.”
The ECB is among the top global central banks leading efforts to launch a digital currency, responding to developments including alternative payments concepts such as Bitcoin.
The Frankfurt-based institution recently completed a public consultation on the prospect of a digital euro, and Panetta said the next step will be to present a preliminary analysis in early summer.
The ECB’s Governing Council will then need to decide whether to proceed, followed by an estimated 18 months of technical work, he explained. In total, a time frame of about 4 to 5 years is “realistic.” The central bank has already launched a working group with the European Commission.
“Trying out the digital euro in different cities would probably be a wise move,” Panetta added. A commercial trial would follow the footsteps of the People’s Bank of China, which has allowed citizens of the southern city of Shenzhen to test a digital yuan at Walmart Inc., gas stations and convenience stores.
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