How much overflow do you make?

06. Dezember 2020

e-Euro white­pa­per

One opti­on to be inves­ti­ga­ted would be to allow users to hold digi­tal euro only up to an indi­vi­du­al thres­hold at any given time. To ensu­re that a user can always recei­ve a pay­ment in digi­tal euro and no infor­ma­ti­on is dis­c­lo­sed on cur­rent indi­vi­du­al hol­dings, a “water­fall” approach would be pos­si­ble wher­eby any inco­m­ing digi­tal euro in excess of the hol­ding limit would be shifted auto­ma­ti­cal­ly to the payee’s account in pri­va­te money. Howe­ver, this would requi­re all payees to hold such an account.

Our next mone­ta­ry poli­cy only con­cern your “over­flow inco­me”. 😉

Demand for a digi­tal euro could also be con­trol­led through incen­ti­ve sche­mes under which less attrac­ti­ve inte­rest rates or ser­vice fees are app­lied when indi­vi­du­al hol­dings exceed the afo­re­men­tio­ned thres­hold.

Be crea­ti­ve with nega­ti­ve inte­rest rates to incre­a­se com­pli­an­ce.

It does not seem fea­si­ble, under cur­rent cir­cum­s­tan­ces, to offer unli­mi­ted hol­dings of digi­tal euro to cor­po­ra­te enti­ties at zero inte­rest rates. In line with the cur­rent mone­ta­ry poli­cy stance of the ECB, the nomi­nal remu­ne­ra­ti­on rate of risk-free euro invest­ments (for examp­le AAA-rated government bonds with a short resi­du­al matu­ri­ty) achiev­a­ble by cor­po­ra­te enti­ties and domestic and inter­na­tio­nal inves­tors is cur­r­ent­ly below -0.5%. Uncons­trai­ned access of the­se enti­ties to a digi­tal euro could not be offe­red cur­r­ent­ly at more attrac­ti­ve rates without dis­rup­t­ing finan­cial flows and the mone­ta­ry poli­cy stance.

Star­ting at below -0.5%.

Bey­ond Zero lower bound: Remu­ne­ra­ti­on of digi­tal off­line money, alt­hough tech­ni­cal­ly dif­fi­cult - might not be out of the ques­ti­on.

It could be argued that the non-remuneration of bank­no­tes crea­tes unin­ten­ded effects, as the oppor­tu­ni­ty cost of hol­ding bank­no­tes varies with cen­tral bank and mar­ket inte­rest rates. From this per­spec­ti­ve, it would seem natu­ral to over­co­me this cons­traint once tech­no­lo­gy allows the cen­tral bank to remu­ne­ra­te its money. Howe­ver, designing a digi­tal euro that is avail­ab­le off­line would face addi­tio­nal chal­len­ges if it was remu­ne­ra­ted.

src: click









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