The European Central Bank clarified concerns from banks about the CBDC project in Europe, the digital euro, replacing banking deposits in the region.
Europe has seen more consultations regarding its central bank digital currency (CBDC) project recently. The European Central Bank, leading the discussions, spearheads the CBDC project concerning the digital euro. Meanwhile, European banking firms have raised concerns about the digital euro replacing bank deposits. They also raised a few other objections regarding the digital euro.
As a result, the European Central Bank (ECB) has published a detailed article on its blog. Three officials of the ECB authored it, clarifying the banking industry’s concerns. Firstly, they noted the digital euro project was still in its preparation phase. The final decisions regarding the project will occur after all legal and functional frameworks.
The three ECB officials said, “Many banks worry their customers might withdraw deposits to hold digital euro instead. These fears are misplaced: a digital euro will be designed as a means of payment and not for investment.”
Piero Cipollone, one of the authors of the article, had also spoken about the project’s privacy aspects a few days back. He assured that the digital euro will have the best privacy and security protocols.
On the other hand, the authors also noted that the ECB will keep holding limits for digital euro holders. Even merchants will only be able to hold only a certain limit. As a result, the banking system’s corporate deposit base will be protected, they stated.
The article also specified why the digital would not eliminate banks as financial intermediaries, nor would it expedite a banking crisis. It further stressed the digital euro’s main application of being a seamless payment method.
The ECB also started exploring the digital euro’s offline use cases in January this year.
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