A digital euro system shouldn’t limit users’ holdings, a paper produced for the European Parliament said, arguing that the risks to financial stability of people deserting conventional banks are overstated.

The paper turns on its head central bankers’ conventional wisdom that individuals shouldn’t be allowed more than a few thousand euros worth of the central bank digital currency (CBDC) to prevent them from using it as a savings vehicle.

The banking industry issued a sigh of relief when the European Central Bank’s Fabio Panetta said individual users of the putative currency would be limited to holding around 3,000 euros ($3,317) worth at a time because he wants the CBDC only used for day-to-day payments.

Panetta’s goals for the project are wrong, said the report produced by academic Christian Hofmann at the request of the European Parliament's Economic and Monetary Affairs Committee.

(by Sheldon Reback)