Ulrich Bindseil, Head of Market Infrastructure and Payments at the European Central Bank (ECB), concluded in a recent work report on the central bank's digital currency (CBDC) released on January 3 that the ECB remains open to digital euro equivalents, But hope to prevent citizens from holding too much. The paper discusses the prospects of issuing a CBDC for the European Union and discusses the differences between this currency and cryptocurrency stablecoins.
For Bindseil, issuing a European CBDC has both advantages and disadvantages, and the EU should address these issues first. Specifically, Bindseil proposed a two-tiered interest rate system that provides "unattractive" interest rates for holdings that exceed a certain threshold. He said this would reduce the likelihood that savers would sell fiat currency to obtain CBDC during a crisis. In this case, it may be easier for depositors to transfer funds out of the ECB's jurisdiction than through the banking system, which is equivalent to running a bank. Bindseil concluded: "By using a well-tested tiered interest rate tool, it seems to be a way to ensure that the number of CBDCs is well controlled."