The Council of the European Union has expressed support for the European Central Bank’s initiative to investigate a digital currency, emphasizing its potential for enhancing financial inclusion. The Council, which includes ministers from the 27 EU member states, noted that the ECB will need to implement restrictions on the maximum value held in digital wallets to mitigate risks to financial stability.
Concerns have been raised regarding the digital euro competing with traditional bank deposits. Edwin Mata, CEO of Bricken, highlighted that unrestricted holding could lead to instability, especially during financial crises, potentially triggering bank runs. The ECB has previously indicated apprehensions about the impact of stablecoins on bank deposits, particularly those tied to the US dollar.
The ECB's officials have pointed out that significant growth in stablecoins could lead to increased outflows from retail deposits, which are vital for banks' funding. Pedro Birman, CEO of Quadra Trade, noted that if digital euros are treated as a store of value, it could severely impact banks' ability to lend, tightening monetary conditions during stressful periods.
The Council’s endorsement of the ECB's approach suggests a unified stance among member states, likely shaping future legislation regarding the digital euro as a payment system rather than a store of value.