-
European
Union
lawmakers
questioned
four
expert
witnesses
on
the
implications
of
a
potential
digital
euro
as
they
consider
legislative
proposals. -
Lawmakers
have
opposed
European
Central
Bank
plans
for
a
digital
euro. -
Experts
answered
questions
on
holding
limits,
closeness
to
cash
and
privacy
concerns
of
a
central
bank
digital
currency
but
seemingly
diverged
on
key
issues.
A
digital
euro
is
complicated,
as
evidenced
by
a
two-hour
public
hearing
hosted
by
members
of
the
European
Parliament
on
Tuesday.
The
EU’s
plans
for
a
retail
central
bank
digital
currency
(CBDC)
from
earlier
this
year
faced
opposition
from
lawmakers
who
questioned
the
need
to
have
one
in
a
jurisdiction
where
payments
are
pretty
efficient,
whether
citizens’
privacy
will
be
preserved,
and
–
more
controversially
–
whether
it
could
be
used
to
expand
state
control.
The
hearing
was
meant
to
help
lawmakers
understand
the
subject
better
as
they
consider
legislative
proposals.
But
the
invited
experts
diverged
on
practically
every
issue
–
from
whether
cash
is
on
the
decline
to
individual
holding
limits
for
a
digital
euro.
“The
arguments
on
balance
today
would
not
favor
such
a
decision
to
issue
a
CBDC
in
my
view,”
said
Italian
economist
Ignazio
Angeloni,
who
wrote
a
paper
for
the
Parliament
this
year
titled
“Digital
Euro:
When
in
doubt,
abstain
(but
be
prepared).”
“An
invasive
form
of
public
intervention
like
this
one
would
be
justified
only
if
clear
evidence
were
to
emerge
of
malfunctioning
in
the
present
system.
But
this
is
not
in
sight
at
the
moment,”
he
added.
Angeloni
was
immediately
countered
by
former
Bank
of
Spain
Governor
Miguel
Fernández
Ordóñez,
who
not
only
praised
a
potential
digital
euro
as
a
safer
asset
than
bank
deposits
but
went
on
to
say
a
CBDC
could
help
deregulate
the
banking
sector
because
a
lack
of
deposits
would
negate
the
need
for
deposit
insurance
and
prudential
measures.
Holding
limits
Vicky
Van
Eyck,
executive
director
of
Positive
Money
Europe,
assured
lawmakers
the
destruction
of
banks
was
not
the
goal.
She
advocated
for
gradually
removing
the
proposed
3,000
euro
CBDC
holding
limit
in
legislative
plans
to
curb
the
mass
abandoning
of
deposits.
“We
don’t
think
that
we
can
jump
from
bank
deposits
to
suddenly
central
bank
digital
currency
with
no
limits.
We
have
no
interest
in
seeing
the
banking
system
crash,”
said
Van
Eyck.
“But
we
do
think
that
a
temporary
holding
limit
that
is
gradually
lifted
through
stress
tests
and
research
is
the
correct
way
to
go.”
The
movement
of
funds
from
commercial
banks
to
the
central
bank
would
put
the
banks
in
danger
and
put
the
financial
system
in
peril,
Angeloni
said,
adding
that
a
digital
euro
bringing
more
safety
to
financial
systems
is
“an
illusion.”
He
added
that
a
CBDC
would
have
a
“contractionary
effect”
on
bank
deposits,
but
how
much
will
depend
on
the
holding
limit.
Bigger
banks
would
suffer
more
from
mass
exodus
because
they’ll
have
to
bear
more
outflows,
said
Marieke
Van
Berkel,
head
of
retail
banking,
payments
and
digitalization
at
the
European
Association
of
Cooperative
Banks
(EACB).
“The
more
customers
you
have,
the
bigger
the
problem
becomes,
which
is
also
the
case
of
cooperative
banks,”
Van
Berkel
said.
Van
Eyck
noted
that
although
the
EU
proposed
a
3,000
euro
limit
on
individual
CBDC
holdings,
banks
initially
pushed
for
a
60
euro
($66)
limit.
Privacy,
crypto
and
the
death
of
cash
One
of
the
biggest
questions
the
ECB
has
faced
is
whether
a
digital
euro
would
replace
cash.
The
central
bank
has
tried
all
sorts
of
campaigns
to
dispel
those
concerns,
including
with
a
Kahoots!
Quiz.
Naturally,
much
of
Tuesday’s
hearing
was
spent
discussing
whether
cash
is
doomed
–
something
Ordóñez
affirmed
but
Angeloni
called
a
“myth.”
“What
we’re
seeing
is
this
gradual
decline
of
the
physical
euro
and
people
shifting
to
risky,
private
digital
currency,
and
that’s
one
more
reason
why
…
it’s
useful
to
have
a
public
currency,”
Ordóñez
said.
Angeloni
said
countries
like
Norway
and
Sweden
–
where
cash
use
is
low
–
are
exceptions
to
the
rule.
“It’s
true
that
U.S.
networks
like
MasterCard
and
Visa
have
high
market
shares
in
Europe,
but
their
dominance
is
far
from
established
in
Germany
and
in
Italy,
for
example,”
he
said.
But
a
digital
euro
similar
to
cash
–
particularly
one
used
for
offline
payments
–
could
enhance
users’
privacy,
according
to
Van
Eyck.
“The
offline
version
of
the
digital
euro
is
crucial
as
it
is
most
able
to
mimic
the
anonymous
nature
of
cash
today.
The
design
and
choice
of
technology
for
the
offline
version
need
to
be
carefully
chosen…”
she
said.
As
for
crypto,
they’re
no
threat
to
traditional
payments,
according
to
Angeloni.
“Crypto
and
stablecoins
are
very
different
assets.
They’re
not
used
and
they
will
not
be
used
in
the
foreseeable
future
for
payments.
That’s
impossible.
They
are
too
volatile.
They
are
too
costly…
So
there
is
no
danger,
in
my
view,
that
crypto-assets
may
compete
with
payments,”
he
said.