The European Central Bank (ECB) intends to cap the issuance of the proposed digital euro at €1.5 trillion ($1.56 trillion), a senior executive at the regional bank has revealed. Fabio Panetta claimed that this would limit the risk of Europeans choosing to save all their money directly with the ECB and starving the commercial banks of the much-needed liquidity.

Panetta, who is a member of the executive board at the ECB, was speaking before the Committee on Economic and Monetary Affairs of the European Parliament. He delved into the evolution of the financial system and how the digital euro would fit in across the region.

Panetta believes digitizing central bank money is logical as payments become increasingly digitized. Not only would a digital euro preserve the role of public money as the anchor of the payments systems, but it would also contribute to the economic efficiency that the bank has been working on for years, he told the lawmakers.

While the digital euro would be transformational, Panetta revealed that its supply would be capped at a maximum of €1.5 trillion to protect the European banking system.

“Our preliminary analyses indicate that keeping total digital euro holdings between one trillion and one and a half trillion euro would avoid negative effects for the financial system and monetary policy. This amount would be comparable with the current holdings of banknotes in circulation,” he said.

Today, the population of the euro area is estimated at around 340 million to 355 million, which would allow for holdings of around €3,000 to 4,000 per capita ($3,134 to $4,178), he added.

The ECB has been researching the viability of the digital euro since 2020. While it’s yet to decide on whether it will move forward with the CBDC, Panetta was confident that the region would have a digital currency in four years.

“Having digital money issued by the central bank and available to everyone would provide an anchor of stability for the payments market, preserving the coexistence of public and private money that has served us well so far,” he told the legislators.

In his speech, Panetta also urged the lawmakers not to approve the use of digital currencies for payments in the euro area, echoing ECB president Christine Lagarde’s views. Even stablecoins must be regarded as digital currency assets and not the e-money tokens they pose as, he said, pointing to the TerraUSD (UST) capitulation as evidence that even stablecoins can’t be trusted for payments.

Source: coingeek.com

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