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The European Central Bank may try to put a cap on the maximum amount of the digital euro each individual can hold per time, should the project eventually go live.
The German Central Bank head of payments Burkhard Balz recently stated that the decision by any country to develop and launch a central bank digital currency (CBDC) might be more of a political decision than technical. Mr. Balz made this assertion while making a Keynote Speech at the China Europe Finance Summit – A Hybrid Conference on Sino-European Capital Markets, virtual event, 20 October 2020.
According to him, the emergence of a CBDC such as that of China currently undergoing its late-stage trials as well as the proposed digital euro has a ton of societal and economic implications which differ per country and as such, the decision to launch a CBDC must be planned in line with this. He stated:
“Introducing CBDC is a political decision rather than a technical decision. Therefore, a comprehensive conceptual analysis and assessment of CBDC relative to alternative options is necessary – especially in terms of the fulfilment of our mandate, but also regarding its impact on society as a whole.”
Balz also noted that one of the core challenges of any digital currency will involve curtailing ways in which over-accumulation by the masses will be prevented. Balz who noted that such scenarios may strain the existing financial system and that the European Central Bank may try to put a cap on the maximum amount of the digital euro each individual can hold per time, should the project eventually go live.
Balz did not end his speech without giving credence to the potential of such new payment system drivers as stablecoins. He noted, “that it is in the interest of the global central bank community that new payment arrangements, like stable coins, with potentially global reach, should only be offered if appropriately regulated and supervised.”
German Official Confirms Involvement in ECB’s CBDC Pursuit
The German role in providing support to the European Central Bank’s CBDC pursuit has been further reiterated by Balz. According to the executive, Germany’s role is dual-faced, while the country is actively engaged in research about the digital euro in line with the other nations in the Eurozone, it is also considering how it can launch an alternative payment system beside a CBDC while functionally discovering all challenges the system may present.
“The Deutsche Bundesbank is deeply involved in the debate on CBDC. But, we are also thinking of alternative solutions which could help to overcome existing pain points, reap the benefits of digitalisation and support new payment use cases without introducing CBDC – and without the possible undesirable implications related to it,” he noted.