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After a two-hour hearing regarding the potential issuance of a digital euro, expert testimony has done little to settle the continent’s legislative debate on central bank digital currencies (CBDCs). 
Members of the European Parliament invited four expert witnesses to a hearing on Tuesday to elucidate the pros and cons of CBDCs while lawmakers reviewed legislative proposals on the matter. 
Those experts, however, proved there is hardly any consensus around the most important questions on the topic, ranging from individual holding limits to whether a digital euro is necessary at all. 
Italian economist Ignazio Angeloni, for example, said the arguments presented during the hearing would “not favor” a decision to issue a CBDC. He added: 
“An invasive form of public intervention like this one would be justified only if clear evidence were to emerge of malfunctioning in the present system. But this is not in sight at the moment.” 
Angeloni published a <a href="https://www.europarl.europa.eu/RegData/etudes/IDAN/2023/741507/IPOL_IDA(2023)741507_EN.pdf">research paper</a> on the implications of a digital euro in April, titled “Digital Euro: When in doubt, abstain (but be prepared).” 
The paper argued that there still isn’t a clear “market niche” for a digital euro to establish itself in today’s competitive retail payment landscape. If there is, it may create an “adverse incentive structure” between retail banks and the digital euro since the latter may spur a run on traditional bank deposits. 
The central bank has previously proposed a holding limit of roughly 3,000 to 4,000 digital euros per person to stem the issue. Though Angeloni suggested this limit may be insufficient, Vicky Van Eyck – another expert witness – was more optimistic. 
<h2 id="will-a-cbdc-destroy-retail-banking">Will A CBDC Destroy Retail Banking</h2> 
 “We have no interest in seeing the banking system crash,” said Van Eyck, the executive director of Positive Money Europe. “But we do think that a temporary holding limit that is gradually lifted through stress tests and research is the correct way to go.” 
If bank deposits contract due to a CBDC, big banks would likely be first to suffer, according to Marieke Van Berkel – head of retail banking at the European Association of Cooperative Banks (EACB). 
“The more customers you have, the bigger the problem becomes,” he said, noting that banks had initially proposed a holding limit as small as 60 euros. 
Of the four experts, the most optimistic on CBDCs was Miguel Fernández Ordóñez, a governor for the Bank of Spain. 
Like <a href="https://cryptonews.com/news/ecb-chief-lagarde-says-digital-euro-not-yet-out-there-would-take-two-years.htm">other central bankers</a> worldwide, the governor touted the digital euro as a safer alternative to both bank deposits and private cryptocurrencies. In fact, a contraction on deposits caused by a CBDC might help deregulate the banking sector by negating the need for prudential measure like deposit insurance. 
“What we’re seeing is this gradual decline of the physical euro and people shifting to risky, private digital currency, and that’s one more reason why … it’s useful to have a public currency,” Ordóñez said. 
Last week, European Central Bank chief Christine Lagarde said her son lost most of his investment after <a href="https://cryptonews.com/news/ecb-president-christine-lagarde-says-her-son-lost-almost-all-money-he-invested-in-crypto.htm">speculating</a> in the private crypto market last year.

Digital Euro Debate Heats Up: Experts Divided on Central Bank Digital Currency

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