Excellent John K. Kumi is a cryptocurrency and fintech enthusiast, operations manager of a fintech platform, writer, researcher, and a huge fan of creative writing. With an Economics background, he finds much interest in the invisible factors that causes price change in anything measured with valuation. He has been in the crypto/blockchain space in the last five (5) years. He mostly watches football highlights and movies in his free time.
Panetta disclosed ECB would most likely cap the number of digital euros between 1 and 1.5 trillion tokens.
European Central Bank (ECB), is fast-moving its digital euro implementation following its announcement that it is looking for companies to participate in prototyping customer-facing payment services. In the latest development, Fabio Panetta, an executive board member of the ECB has disclosed that efforts are underway to ensure that the digital euro is prevented from being used as an investment product.
In this regard, ECB has proposed to limit the total holding of the asset. In a speech for the Committee on Economic and Monetary Affairs of the European Parliament, Panetta disclosed ECB would most likely cap the number of digital euros between 1 and 1.5 trillion tokens. According to reports, larger holdings are subjected to less attractive rates.
“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,” he said. “This amount would be comparable with the current holdings of banknotes in circulation. As the population of the euro area is currently around 340 million, this would allow for holdings of around 3,000 to 4,000 digital euros per capita,” Panetta added.
In July 2021, the ECB announced an investigation phase into the digital euro, however, there is strong opposition to the proposal to create “CBDC with anonymity” as the best option compared to the traditional digital payments. The digital euro is expected to be launched in 2026. Panetta also called for healthy coordination between companies in the private sector and public officials for an effective rollout of the CBDC.
An ECB focus group on digital payment methods commissioned in September 2021 disclosed their findings that the digital euro is more likely to be accepted in physical and online stores. According to Panetta, for an adoption trend to be experienced, all merchants must accept it as well.
“The introduction of euro banknotes made it possible for us to pay with physical euros anywhere in the euro area. So it is no surprise that people expect to be able to use the digital complement to banknotes wherever they can pay digitally or online,” he said.
The investigative findings from the focus group disclosed that members of the general public were unfamiliar with the digital euro, and were concerned about the increasing use case of technology and how it could phase out cash from the system. After it was explained to them, they admitted that the most desirable feature of the digital euro is to be widely accepted in shops and online. Merchants, on the other hand, cited high demand as their biggest driver.
CBDC has been of high interest since the Central Bank of the Bahamas released its version in October 2020.