Digital Euro May Impose Transaction Limit for Individual Users

UTC by Benjamin Godfrey · 3 min read
Digital Euro May Impose Transaction Limit for Individual Users
Photo: Depositphotos

While the expected transaction limits have not been finalized as the development of a prototype of the Digital Euro is still going on, the possibilities have shown how much oversight the ECB plans to have over the CBDC.

The European Union’s Central Bank Digital Currency (CBDC) dubbed the Digital Euro may be launched with some restrictions or transaction limit for individual retail users.

Speaking at the “Towards a legislative framework enabling a digital euro” conference hosted by the European Commission, Fabio Panetta, a board member at the European Central Bank (ECB), said the restrictions may entail a cap of €3,000 as a typical example of the store of value cap.

The ECB executive also noted that transaction limits may be imposed which could be a total of 1,000 transactions 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, explaining: “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.”

While the expected transaction limits have not been finalized as the development of a prototype of the Digital Euro is still going on, the possibilities have shown how much oversight the ECB plans to have over the CBDC.

Prior to this time, a number of stakeholders have questioned how much will the Central Banks around the world will control the circulation of digital fiat currencies when they eventually choose to launch theirs. Many have argued that a non-controlled CBDC in terms of transaction and store of value caps may be more detrimental as it concerns their susceptibility to being used for illicit transaction finance across the board.

Fabio Panetta posited that failure to impose store-of-value limits and transaction caps will pose a threat to financial instability in the economy in general.

Despite Limit, the Digital Euro Is Designed to Complement Cash

Another vital positioning Fabio Panetta hinged his comments on was the status of the Digital Euro CBDC’s compatibility with fiat.

Against the assumption that the new form of money will likely displace the fiat version, Fabio Panetta said both versions are designed to work hand in hand and complement each other.

“Digital euro would be an additional option for retail payment – not a challenge to the function of the financial system,” Panetta said, highlighting that the CBDC is not meant to replace cash.

The position of the ECB is different from the agitation from other stakeholders in other parts of the world including Argentina. In a recent development, a former banker in the country, Carlos Maria De Los Santos put forth a proposal to the Argentine government to make the Digital Peso the only form of legal tender.

This approach she argued will significantly cut down the losses due to tax evasion and rather, return a surplus to the Argentine economy. While all economies are not free from tax evasions, the European Union does not have this as a major menace and as such, the proposition from De Los Santos may not be a proper fit.

While no certainty that the Argentine lawmakers will accept the proposal, it shows how divergent opinions on the roles of CBDC can be from one country to the other.

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Benjamin Godfrey

Benjamin Godfrey is a blockchain enthusiast and journalists who relish writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desires to educate people about cryptocurrencies inspires his contributions to renowned blockchain based media and sites. Benjamin Godfrey is a lover of sports and agriculture.

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