The EU’s Central Bank Digital Currency (CBDC), a digital version of the Euro, is being developed by the European Union at the moment, although there are concerns that consumer demand for the CBDC may be minimal and there may be limits in terms of transactions.
Fabio Panetta, a member of the European Central Bank (ECB) Executive Board gave a speech at a conference titled “Towards a legislative framework enabling a digital euro,” organized by the European Commission.
In his speech, he claimed that the ECB is considering the possibility of issuing a digital euro alongside euro banknotes, a digital form of money that would be a claim on the central bank rather than a claim on a private intermediary.
He claimed that a major threat in using the CBDC is the transfer of cash deposits by individuals from one bank to another financial intermediaries.
This is one of the reasons the ECB is trying to include restriction limits to the euro CBDC. Panetta also gave the example of a store-of-value limit of €3,000 and a monthly transaction limit of 1,000 even though restrictions have not been fixed because of ongoing consultations about the digital euro.
Panetta believes that the goal of a digital euro would be to stimulate digitalization while preserving people’s freedom of choice in terms of how they pay and guaranteeing that their payments remain affordable and secure. It would be made to be secure, free, simple to use, and easy to access, promoting financial inclusion.
The Growing Demand for the Digital Currency
The European Commission (EC) proposed a bill to launch a digital currency next year. The introduction of a digital euro, however, requires the consent of the Eurozone governors. The digital euro might enter circulation by 2025 if they approve it.
Sachin Mehra, the chief financial officer of the financial services corporation Mastercard, recently shared his opinions on cryptocurrencies.
Mehar stated in an interview that he thinks stablecoins and central bank digital currencies (CBDCs) have the ability to fill the role of a payment instrument while cryptocurrencies are currently considered to be too volatile for that.
The Central Bank of India (RBI) announced earlier this month to launch of a CBDC pilot program that will feature nine commercial banks in the country. According to the RBI, the adoption of the digital rupee is anticipated to increase the productivity of the interbank market because settlement in central bank money would reduce transaction costs.
