Digital euro may have transaction limits and store-of-value caps

Quick Take

  • The European Union’s potential central bank digital currency may have low transaction and storage thresholds for individual users.
  • The European Central Bank is currently investigating and developing a digital euro prototype.

The European Union’s central bank digital currency (CBDC) may have transaction and store-of-value limits for individuals, Fabio Panetta, an executive board member of the European Central Bank (ECB), suggested at the "Towards a legislative framework enabling a digital euro" conference hosted by the European Commission.

Exact limits are not set in stone — as the digital euro project is still in an investigation phase within the ECB — but Panetta mentioned 3,000 as an example store-of-value limit and 1,000 transactions as a monthly limit.

“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.” 

This would be a threat to financial stability in times of crisis, he added — which is why the ECB is looking to introduce transaction limits for the potential CBDC. 

“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.

Panetta also pointed toward a €50 cap on transactions, citing anti-money laundering provisions.

However, Christian Lindner, the German minister of finance, expressed concerns. “I wonder whether people would accept €50 as they can pay in cash hundreds and more,” he said, adding: “We should introduce a digital euro that is really accepted by people and not only by policymakers.”

The ECB is expected to decide whether to move forward with a realization phase by September 2023. With a legislative proposal expected from the European Commission, the continuation of the European CBDC project is becoming more likely. 

Update: Added new information regarding a potential €50 cap on transactions, as well as a quote from Christian Lindner.

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