ECB's Panetta: Digital euro would be capped at 1.5T euros to avoid financial stability risks

European Central Bank executive board member Fabio Panetta said Wednesday that the ECB's holdings of a digital euro would be capped at 1.5T euros ($1.6T) in an effort to steer clear of financial stability risks. A digital euro refers to a central bank digital currency ("CBDC"), a digital representation of fiat currencies like the U.S. dollar or euro. Since CBDC's are issued by central banks, commercial banks would have less of an ability to lend, or create money. "Keeping total digital euro holdings between one trillion and one and a half trillion euro would avoid negative effects for the financial system and monetary policy," Panetta stated at the European Parliament's Committee on Economic and Monetary Affairs. "As the population of the euro area is currently around 340 million, this would allow for holdings of around 3,000 to 4,000 digital euro per capita," he added. Panetta's remarks come after the central bank in July