Digital Euro CBDC Designed for Payments, Not Investment, Says ECB

According to CryptoPotato, the European Central Bank (ECB) has clarified that the digital Euro Central Bank Digital Currency (CBDC) is designed for making payments, not for investment. Ulrich Bindseil, Jürgen Schaaf, and Executive Board member Piero Cipollone explained in a blog post that many banks worry their customers might withdraw deposits to hold digital Euros instead, but these fears are misplaced. The ECB is developing a digital Euro CBDC with legal tender status functioning as a digital payment solution for Europe. However, concerns are growing over a potential flow of deposits from retail banks to the central bank, which controls the CBDC. To address these concerns, individual holdings of the digital Euro would be limited to preserve the role of commercial banks. The CBDC would not pay interest and would have no corporate holdings. A "reverse waterfall" mechanism would link digital Euro accounts to bank accounts, covering any shortfalls from the latter, reducing incentives to hold large digital Euro balances. The ECB has designed the digital Euro to mitigate risks of disintermediation and significant outflows from bank deposits. The combination of limits, no interest, and the "reverse waterfall" would discourage using it for investment purposes. The ECB also warned over the threat of stablecoins and "e-money," which presumably referred to cryptocurrencies. It stated that non-banks have no obvious incentive to limit the use of their stablecoins or the services they offer, and the use of stablecoins could become significant. In essence, the ECB has said that the digital Euro is not a store of value. The central bank has also released a video explaining the perceived benefits of a digital Euro, mentioning "safeguards for financial stability, like digital Euro holding limits." However, it does not mention that transactions will be monitored, surveilled, and linked to digital identities, giving the central bank more power to restrict spending in certain scenarios.