ECB Says Digital Euro Could Strengthen Bank Deposits
The European Central Bank (ECB) has suggested that the introduction of a digital euro could actually increase bank deposits, countering concerns about potential outflows. A senior ECB official, Piero Cipollone, stated that the shift from cash to digital payments would likely boost deposits, offsetting any losses from the new digital currency.
The ECB analyzed the impact of a digital euro with a holding limit of up to €3,000 on 2,025 banks under two scenarios: 'business as usual' and 'flight to safety.' The findings were reassuring. Under normal conditions, the digital euro is expected to have a minimal effect on bank liquidity and funding metrics. Digitalization itself is projected to generate a €127bn inflow into bank deposits by 2034, surpassing any potential outflows related to the digital euro.
Even in an extreme scenario, the liquidity coverage ratio would only fall below 100% for 13 banks, representing just 0.3% of total banking-sector assets. Cipollone emphasized that holding limits would effectively contain deposit outflows and safeguard financial stability.
The ECB is currently in talks with the European Council, European Commission, and European Parliament about the digital euro's introduction, aiming to conclude discussions by the end of the year. A pilot project is set to begin in the second half of 2027, involving 36 selected payment-service providers from across the eurozone. The final decision on issuing the digital euro will be made by the ECB's governing council after the law is adopted, with an expected launch by 2029.