EU Advances Digital Euro With Strict Balance Limits to Protect Banks
European policymakers have solidified plans for a digital euro, endorsing strict holding limits to prevent it from becoming a savings vehicle. The European Central Bank's design prioritizes payment functionality over store-of-value attributes, with caps on individual balances to maintain financial stability.
Officials emphasized the need to protect commercial banks from deposit flight. Unrestricted digital euro holdings could shift liquidity away from traditional lenders, disrupting monetary transmission. The framework includes both online and offline capabilities to ensure broad accessibility while containing systemic risks.
This cautious approach contrasts with private stablecoin proliferation. By treating the CBDC as a transactional tool rather than investment asset, EU leaders aim to modernize payments without destabilizing existing banking infrastructure.
