Digital Euro May Have Transaction Limits for Retail Users

With the European Central Bank (ECB) now developing the prototype for its Central Bank Digital Currency (CBDC) otherwise known as the Digital Euro, more details are now surfacing based on its potential operational dynamics.

Speaking recently at the "Towards a legislative framework enabling a digital euro" conference hosted by the European Commission (EC), Fabio Panetta, a board member of the ECB said the bank may impose some restrictive limits on transactions for the retail individual users.

While Panetta acknowledged that the ECB has not made any final decision on what the limit will be, he said €3,000 is a good example of a limit the bank can impose on the Digital Euro as a store of value. He went on to say that the total number of transactions that can be done by individuals may also be capped at 1,000 per month.

“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,” Panetta said, “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.” 

The ECB board member also highlighted on an important subject regarding the Digital Euro and how it will co-exist with fiat. According to him, both versions of the Euro will complement each other to make for a robust financial ecosystem within the bloc.

“Digital euro would be an additional option for retail payment — not a challenge to the function of the financial system,” he said confirming that the new money is not designed to replace cash, a position that echoes similar words from ECB President Christine Lagarde.

Other Central Banks have maintained this position, noting that their CBDC will not displace cash nor make them obsolete. This argument brings a lot of doubt considering the wide embrace of people to the digital economy and the financial evolution which has largely relegated cash in some countries.