Negative rates could discourage CBDC hoarding, official says; Central bank money for public may undermine banks’ stability
European Central Bank Executive Board member Fabio Panetta said a
digital euro might be the innovation that sees negative interest rates
passed directly to consumers.
at an event on Wednesday, Panetta said officials keen to prevent bank
runs could make the hoarding of digital central bank money unattractive
by “penalizing remuneration” of holdings in excess of 3,000 euros.
The ECB is among the top global central banks looking into a
digital currency. While any digital euro would be a breakthrough in
technological innovation, there are concerns that consumers with the
option of storing money directly with the monetary authority would drain
their commercial bank accounts during a crisis, causing financial
ECB President Christine Lagarde said at a separate event that
a central bank digital currency could come in about 4 years. She was
also dismissive of private digital currencies such as Bitcoin and said
it’s probably “out of the question” that her institution would hold it.
Read more: Central Banks Edge Toward Money’s Next Frontier in Digital World
Panetta said interest rates of -1% or -2% on a central bank
digital currency probably wouldn’t be enough to thwart such runs during
acute shocks. Any system would need “highly penalizing” tiered
remuneration, he said.
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