The Council of the European Union, an EU body that amends legislation and obligates national governments to adopt the bloc’s laws, said it backs the European Central Bank’s plan to explore an official digital currency, calling it an evolution of money and a tool for financial inclusion.
However, in a Friday posting on its website, the Council said the ECB would need to set limits on the total value that can be held in online accounts and digital wallets at any one time to “avoid the digital euro being used as a store of value” to prevent it from having any impact on financial stability.
The Council consists of ministers from the 27 nations in the bloc and shapes EU legislation together with the European Parliament. Its approval signals broad national alignment around the central bank’s digital currency design, raising the likelihood that future legislation will reflect the ECB’s approach.
“The holding limits are not just about abstract financial stability,” Edwin Mata, co-founder and CEO of tokenization platform Bricken, told CoinDesk. “They are about preventing the digital euro from competing directly with bank deposits. If people could have unlimited digital euros, deposits could move instantly from commercial banks to the ECB, especially in times of stress, effectively speeding up bank runs.”
The ECB has warned of similar risks posed by stablecoins. Its officials have pointed to dollar-pegged assets such as Tether’s USDT and Circle Internet’s (CRCL) USDC, warning that “significant growth in stablecoins could cause retail deposit outflows, diminishing an important source of funding for banks and leaving them with more volatile funding overall.”
Makes sense with digital euro savings ceilings
The ECB’s concern goes beyond vague “financial stability,” said Pedro Birman, CEO of Quadra Trade.
“In the Eurosystem, most money is created by commercial banks through lending,” he said in an interview. “If digital euros could be freely held as a store of value, a large-scale migration from bank deposits to ECB money held in self-deposit would shrink banks’ deposit bases. It would directly limit credit creation, increase funding costs for banks and act as an unintended monetary tightening, especially in times of stress.”
This concern is echoed by others who see the ceilings as a necessary design tool to protect the balance of the financial system.
“The message is clear: the digital euro is being designed as a payment rail, not a balance sheet, and the caps are there to ensure it never becomes one,” said Amber Ghaddar, founder and CEO of The 200Bn Club and Nexera.
According to Ghaddar, large digital-euro balance sheets would also risk weakening monetary policy transmission, potentially forcing the ECB into difficult decisions such as whether to pay interest on retail central bank money or accept reduced control over interest rates.
Protection of banks against competition
Still, others remain skeptical. As the ECB shapes its policy around financial stability, the effect is also to protect banks from new forms of competition, said Jonatan Randin, senior market analyst at PrimeXBT.
He pointed to ECB analysis published in February 2024 that the said holding limits are designed to preserve the financial functioning of commercial banks and protect the deposit base of companies. A study by Copenhagen Economics estimated that such a move could reduce banks’ net interest income by 7% on average, rising to 13% for smaller lenders.
“Banks make a profit by holding customer deposits and lending that money,” Randin said. “A digital euro without strict borders would provide citizens with a risk-free alternative, reducing banks’ access to cheap financing.”
Arthur Breitman, the founder of the Tezos blockchain, made a similar point. He said the measure is intended to prevent sudden flight of deposits from commercial banks to what would effectively be risk-free central bank money. While that protects banks’ funding models, he added, it also reflects how dependent the current system is on commercial banks to extend credit.
Charles d’Haussy, CEO of the dYdX Foundation, pointed to the contrast in global approaches. “Europe is strongly committed to a sovereign digital CBDC, which is the digital euro, to maintain monetary control and privacy in a fully regulated framework,” he said. “Much of the rest of the world, especially the US and dollar-centric regions, favors private stablecoins for their speed, innovation and global scale.”
At its core, the debate reflects a tension at the heart of central banks’ digital currency design: how to offer the public a reliable, modern payment tool without undermining the financial system that already exists. The ECB and EU policymakers see keeping borders as a necessary guardrail to maintain this balance. Critics, meanwhile, warn that the same limits could limit the digital euro’s usefulness and protect incumbents from meaningful competition.
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