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EU Council Backs ECB's Digital Euro Plan with Limits
25 Dec
Summary
- EU Council supports exploring a digital euro, seeing it as money's evolution.
- Holding limits will prevent the digital euro from becoming a store of value.
- Caps aim to protect financial stability and prevent bank deposit outflows.
The Council of the European Union has signaled its support for the European Central Bank's initiative to explore a digital euro. This endorsement views the digital currency as a natural evolution of monetary systems and a potential driver for financial inclusion across the bloc.
To maintain financial stability, the Council has proposed implementing holding limits for digital euro accounts and wallets. These restrictions are crucial to prevent the digital euro from functioning as a primary store of value, which could otherwise divert funds from commercial bank deposits, particularly during times of economic stress.
This approach aims to ensure the digital euro primarily serves as a payment rail rather than a competitor to traditional banking services. Experts believe these limits are essential to protect the euro system's credit creation capacity and prevent unintended monetary tightening.
