欧洲央行-CBDC宏观经济建模：批判性回顾（英）

EUROPEANCENTRALBANK

EUROSYSTEM

WorkingPaperSeries

UlrichBindseil,RichardSennerMacroeconomicmodellingofCBDC:acriticalreview

No2978

Disclaimer:ThispapershouldnotbereportedasrepresentingtheviewsoftheEuropeanCentralBank(ECB).TheviewsexpressedarethoseoftheauthorsanddonotnecessarilyreflectthoseoftheECB.

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Abstract

Overthelastdecades,macro-economistshaverenewedtheireffortstoreducethegapbetween

monetarymacroeconomicsandreal-worldcentralbanking.Thispaperreviewshowmacroeconomicshassince2016approachedthepossibleintroductionofretailcentralbankdigitalcurrencies(CBDC).AreviewoftheliteraturerevealsthatmacroeconomicmodelsofCBDCoftenrelyonCBDCdesignfeaturesandnarrativeswhicharenolongerinlinewiththeoneofcentralbanksactuallyworkingonCBDC.Inparticular,theliteratureoften(i)doesnottakeintoaccountthenatureofcentralbanks’CBDCissuanceplansasa“conservative”reactiontoprofoundtechnologicalandpreferentialshiftsintheuseofmoneyasameansofpayments,(ii)doesnotstartfromdesignfeaturescommunicatedbycentralbanks,suchasno-remuneration,quantitylimits,accessrestrictions,andautomatedsweepingfunctionalitylinkingCBDCwalletswithcommercialbankaccounts;(iii)doesnotexplainwellenoughthedifferencebetweenCBDCandbanknoteswithintheirmacro-economicmodels,apartfromremuneration(whichcentralbanksactuallydonotforesee);and(iv)assumethatCBDCwillleadtoasignificantincreaseinthetotalholdingsofcentralbankmoneyintheeconomy,although(i)and(ii)makethisunlikely.

JELClassification:E3;E5;G1

KeyWords:centralbankdigitalcurrencies;macroeconomics;financialstability;centralbankmoney

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Non-technicalsummary

Thedigitalizationoflargepartsofeverydaylifeandoftheeconomyalsoextendstopaymenttransactions.Intheeuroarea,forexample,theshareofcashpaymentsatthepoint-of-sale(i.e.inphysicalshops)declinedfrom79%to59%between2016and2022,mainlyforthebenefitofcardpayments.Ifthistrendcontinuesorevenaccelerates,theroleofcashandthuscentralbankmoneywoulddecreasesignificantlyforthebenefitofprivatepaymentserviceproviders.Thisalsoraisesconcernsaboutinsufficientcompetition,inclusiveness,privacyprotectionaswellasstrategicautonomyofsovereignstates.

Againstthisbackdrop,aheateddebateaboutretaildigitalmoneyissuedbycentralbanks-centralbankdigitalcurrency(CBDC)-beganin2016.Duetothegrowingnumberofpapersthatpresentmacro-economicmodelsexaminingCBDCand,ontheotherhand,quitedetailedplansbycentralbankstoissueCBDC,thispaperexaminestowhatextenttheassumptionsandscenarioscontainedinthesemacroeconomicmodelsofCBDCcorrespondtotheobjectivesandemergingdesignchoicescommunicatedbycentralbanksandrelatedtothis,howapplicablethepapers’predictionsofmacroeconomiceffectsaretotheCBDCsoutlinedorannouncedbycentralbanks.ThechoicestobemadewithregardstotheissuanceanddesignofCBDCareofhighimportanceforsociety,andcentralbankersandlegislatorswanttounderstandwhatisatstake.

AllcentralbanksworkingonCBDChaveannouncedthatCBDCwouldnotberemunerated,thatholdingswouldbelimited,andthatCBDCissuancewouldaimtopreservetherolesofcentralbankmoneyinretailpaymentsinadigitalizedworld.AnothersetofkeyfeaturesannouncedforCBDCsarethosethatallowtosomewhatdecouplethestoreofvaluefromthemeansofpaymentsfunctionofCBDCandthatfacilitatethepreservationofasinglepoolofmoneyforcitizens.Forexample,theECBannouncedaso-called“reversewaterfall”sothatuserswouldnothavetoprefundadigitaleuroaccountbeforemakingpaymentsbecausethedigitaleuroaccountcanbelinkedtoacommercialbankaccount.Lastbutnotleast,centralbankshaveannouncedaccessrestrictionsforCBDC.Forexample,theECBplanstoonlyallownaturalpersonswhoarepermanentresidentsoftheeuroarea(orpossiblyoftheEU),andtemporaryresidents(e.g.travelers)tobeabletoholddigitaleurowithinthelimits.

ThefeaturesthatcentralbankshaveannouncedareimportantforanymacroeconomicconsequencesofCBDC.However,ourpaperfindsthatthemacro-economicliteratureoftenprovidesanswerstokeypolicyquestionswhichrelyonearlyCBDCnarrativesanddesignassumptions,andlessontheexplanationsandplansoutlinedbycentralbanks.OurpaperidentifiesinparticularthefollowinggapswhichfutureresearchonthemacroeconomicsofCBDCcouldconsiderclosing.

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First,themodellinginallthepapersassumesthatthedecisiontoissueCBDChitsastaticmonetaryandfinancialsystemandisnotareactionofthecentralbanktoachangingpaymentsenvironment.Accordingtorecentcentralbankexplanations,thedecisiontoissueCBDCwouldhoweverbea“conservative”responsetoprofoundchangesofthemonetarysystemrelatingtodigitalization,notablythelesserandlesseruse(andultimatelylowerstock)ofbanknotes.

Second,manypapersdonotconsiderthedesignfeaturesofpossibleCBDCsasoutlinedmorerecentlybycentralbanks.MostpapersassumeremuneratedCBDC,orthatCBDCisofconsiderablevolume,andderivemacroeconomiceffectsfromthat,althoughatleastsince2019allongoingcentralbankCBDCinitiativescenteredonnon-interest-bearingCBDC.

Third,asreal-worldCBDCsareexpectedtobeunremunerated,itisdifficulttospecifyacleardifferencebetweenCBDCandcashinmacro-economicmodels,andindeednoneofthepapersdevelopsthisdifferenceinawaythatcouldimplymacro-economicconsequences.

Fourth,andrelatingtopreviouspoints,thepapersgenerallytendtoassume,inlinewithearliernarratives,thattheissuanceofCBDCwillconsiderablyincreasetheamountofcentralbankmoneyincirculation.Thedeclininguseofbanknotes,andtheveryprudentCBDCdesignasannouncedforexamplebytheECB,makeratherlikelythatthetotalamountofcentralbankmoneyincirculationwillfollowalowertrendgrowthinthefuturethanitdidinthepast.Moreover,themodelswhobasetheirmacroeconomicpredictionsontheassumedeffectofCBDCtoincreasecentralbankmoneyincirculationcouldbeconsideredtonotreallybemodelsoftheeffectsofCBDC(butmodelsdescribingthemacroeconomiceffectsofalargeramountofcentralbankmoneyincirculation,whichcouldbedrivenequallywellbyanincreaseofbanknotes).

Undertheassumptionofever-progressingdigitalizationofsociety,themacro-economiceffectsofissuingCBDCshouldbeidentifiedstartingfromthecounterfactual.Ifretailpaymentsareexclusivelylefttotheprivatesectorandcentralbankmoneywouldbemarginalized,thentheamountofcentralbankmoneyincirculationwillsignificantlyshrink,thelengthofcentralbankbalancesheetswoulddeclineandthebankswouldbenefitfromdepositinflows,paymentcostswillincrease(duetoincreasingmarketpowerofthesuccessfulfirmsinamarketwithstrongnetworkexternalities),monetaryandfinancialstabilitywillbeweakened(astheunifyingconvertibilitytestofallprivatemoneys,i.e.tobeexchangeableatsightagainstcentralbankmoney,willhavebecomeremoteorinexistant),andstrategicautonomywillbeunderminedwithnegativeconsequencesunderscenariosofafurthergeopoliticaldeterioration.Inthissense,theissuanceofCBDCaimsatpreservingeconomicefficiencyandstabilitybypreservingthecurrentroleofcentralbankmoney(agenuinepublicgood).

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Ofcourse,itcannotbeexcludedthatsomecentralbanksandlegislatorswillinthefuturedesignCBDCswhichbettermatchtheassumptionstakeninthemacro-modelsreviewed.Forthisreason,themodelsremainusefulforfuturescenarios.Moreover,macro-economicresearcherscouldreviewthemacro-economicpredictionsofthemodelsforCBDCsdesignedasinrecentcentralbankcommunications.

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1.Introduction

Thedigitalizationoflargepartsofeverydaylifeandoftheeconomyalsoextendstopaymenttransactions.Intheeuroarea,forexample,theshareofcashpaymentsatthepoint-of-sale(i.e.inphysicalshops)declinedfrom79%to59%between2016and2022,mainlyforthebenefitofcardpayments.1IntheUS,cashusefellfrom40percentin2012to19percentin2020,andinSwedenfrom33percentto10percentoverthesameperiod.2Ifthistrendcontinuesorevenaccelerates,theroleofcashandthuscentralbankmoneywoulddecreasesignificantlyforthebenefitofprivatepaymentserviceproviders.Thiswouldlikelyleadtoareducedusabilityofcentralbankmoneyandfrequencyofconversionofbankdepositsintocentralbankmoney.Moreover,thisraisesconcernsaboutinsufficientcompetition,inclusiveness,privacyprotectionaswellasstrategicautonomyofsovereignstates.

Againstthisbackdrop,agrowingnumberofcentralbanksstartedtopreparefortheissuanceofCBDC(forexamplethePBoCin2014,theRiksbankin2016,Indiain2017,andtheECBin2019).Theenvisageddesignfeaturesofretail3CBDCsthatconsistentlyemergedacrosstheseCBDCsprojectincludenon-remunerationandlimitationofholdings.ByissuingCBDC,centralbankswanttopreservethebenefitsforcitizensoftheco-existenceofcentralbankmoneynexttocommercialbankmoney(morechoiceforcitizensandmerchants,preventingabuseofmarketpowerbyfewdominantprivatefirmssincepaymentshavestrongnetworkeffects,preservingtheanchoringofallformsofprivatemoneyinaneffectiveconvertibilitypromiseintousablecentralbankmoney)andmodernizingcentralbankmoneyavailabletocitizensbyallowingtheadvantagesofelectronicpayments(integrationintomobilephone;overcomingtheneedtowarehousecashinaseparatewallet;reducingriskoftheft;overcomingcostsassociatedtocashincludinghigherenvironmentalfootprint)toalsobenefitcentralbankmoneyandnotonlycommercialbankmoney.

Inparalleltotheactualworkofcentralbankpaymentexperts,aheatedacademicdebateaboutCBDCbeganin2016.Between2016and2020,around1100papershavebeenpublishedthatcontainthe

1SeeECBSPACEpublicationhere

https://www.ecb.europa.eu/stats/ecb_surveys/space/html/ecb.spacereport202212~783ffdf46e.en.html

2SeeFEDs“MoneyandPayments:TheU.S.DollarintheAgeofDigitalTransformation”,

here.

3Weusetheterm“CBDC”for“retailCBDC”i.e.electroniccentralbankmoneyavailableforcitizensforretail

payments.TheBIShasalsoproposedtheterm“wholesaleCBDC”butweconsiderthisuseasconfusingsince

electroniccentralbankmoneyhasbeenaccessibleforbanksforalongtimeintheformofRTGSbalances.Theterm“retailpayments”isactuallyusedintheliteratureandbypractitionersinvariousways:someuseitas

referringonlytopaymentsinvolvingnaturalpersons,suchas“POI”payments("P2B”–persontobusiness,

essentiallyinphysicalshopsande-commerce)andP2P(persontoperson)payments,whileotherswoulduseitforallpaymentswhicharenotinterbankpayments,i.e.includingB2B(businesstobusiness)payments.For

example,thedigitaleuroisaCBDCforretailpurposesinanarrowsense,excludingB2Bpayments.

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keywords“CBDC,centralbank,models”accordingtoGooglescholar,andin2023alonemorethan2000suchpaperswereadded4.Atthesametime,thecentralbanksthatareconsideringissuingCBDChavealsoincreasinglycommunicatedintentions,plansanddesignspecifications(e.g.ECB,2023a).

Duetothegrowingnumberofpapersthatpresentmacro-economicmodelsexaminingCBDCand,ontheotherhand,quitedetailedplansbycentralbankstoissueCBDC,thispaperexaminestowhatextenttheassumptionsandscenarioscontainedinthesemacroeconomicmodelsofCBDCcorrespondtotheobjectivesandemergingdesignchoicescommunicatedbycentralbanksandrelatedtothis,howapplicablethepapers’predictionsofmacroeconomiceffectsaretotheCBDCsoutlinedorannouncedbycentralbanks.ThechoicestobemadewithregardstotheissuanceanddesignofCBDCareofhighimportanceforsociety,andcentralbankersandlegislatorswanttounderstandwhatisatstake.ItisthereforelogicalthatbothalsoturntoacademicliteratureonCBDCwiththeassumptiontofindrelevantpredictionsregardingmacro-economiceffects,andthatbothalsoconsiderbasingtheirchoicesontheconclusionsofthisliterature.Themacro-economicliteratureaimsatbeingpolicy-relevantforvariouskeychoicestobemade,asalsoillustratedbythetitlesofthepapers:“Shouldcentralbanksissuedigitalcurrency?”(KeisterandSanches,2023),“CBDCandtheoperationalframeworkofmonetarypolicy”(Abadetal.,2023),“Assessingtheimpactofcentralbankdigitalcurrencyonprivatebanks”(Andolfatto,2021),“TheoptimalquantityofCBDCinabank-basedeconomy”(Burlonetal.,2022),“CentralBankDigitalCurrency:whenpriceandbankstabilitycollide”(Fernández-Villaverde,2023),“Centralbankdigitalcurrency:Welfareandpolicyimplications”(Williamson,2022).Thepapersarerelyingonsomeveryspecific(previouslyexisting)macro-economicmodels,withfewexceptionsasforexampleGrossandLetizia(2023),andequallyspecificassumptionsregardinghowCBDCentersthismodel.Moreover,aswillbeexplainedinmoredetailinsection3,assumptionsonreasonstoissueCBDCandonCBDCdesignfeaturesoftenrelyonanearlynarrativethatprecededandoftendeviatesfromtherelatedannouncementsofcentralbanks.

WhatcentralbankshaveannouncedonCBDCdesign

Inprinciple,avarietyofCBDCdesignscouldbecompatiblewiththemotivationofcentralbankstopreservetheroleofcentralbankmoneyinpayments,includingtheintroductionofpotentiallyunlimited,large-scaleorremuneratedCBDC.WhenCBDCsfirststartedbeingdiscussedin2015/2016bycentralbankresearchers(suchasBarrdearandKumhof,2016/2021),uncertaintyaboutthesedesignfeatureswashighandcentralbankpaymentdepartmentshadnotyetworkedontheactual

4NotallofthesepapersmaybelimitedstrictlytoretailCBDC,butthelargemajorityis.Indeed,“wholesaleCBDC”istypicallyconsideredtonothaveanymacroeconomicconsequences(seealsopreviousfootnote).

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specificationsofCBDCs.Aspaymentexpertsprogressedintheirworkandcentralbanksstartedunveilingtheiractualplans,however,thisuncertaintygraduallydissipated.Inthissense,itisnaturalthatearlyacademicresearchworkonthetopicfeaturessomehypothesizedcharacteristicsofCBDCsthatdonotcoincidewiththedesignsthatwereworkedoutbypaymentexpertsandendorsedbythecentralbankdecisionmakers.WhenconsideringtheissuanceofCBDC,centralbankshavebeenparticularlycarefulwithregardstounintendedconsequencesofCBDC,whiletheyshowedlittleappreciationforthepositiveeconomiceffectsthatresearchpapersconsideredpossiblethroughremunerationorviasomequantityeffectsifCBDCholdingswouldbelarge.CentralbanksessentiallyapproachedthedesignofCBDCinawaytopreserve,andnottoexpandtherelativeroleofcentralbankmoneyintheeconomy.Therefore,theyalsooptedagainstusingCBDCforextendingtheirfootprintontheeconomyattheexpenseofbanksandtherebywentagainstthosewhofavoredtheideatousetheissuanceofCBDCtomovetowardsa“sovereign”monetarysystem.Forexample,DysonandHodgson(2016)consideredthatCBDC

“…canmakethefinancialsystemsafer:Allowingindividuals,privatesectorcompanies,andnon-bankfinancialinstitutionstosettledirectlyincentralbankmoney(ratherthanbankdeposits)significantlyreducestheconcentrationofliquidityandcreditriskinpaymentsystems.Thisinturnreducesthesystemicimportanceoflargebanksandtherebyreducesthenegativeexternalitiesthatthefinancialinstabilityofbankshasonsociety.Inaddition,byprovidingagenuinelyrisk-freealternativetobankdeposits,ashiftfrombankdepositstodigitalcashreducestheneedforgovernmentguaranteesondeposits,eliminatingasourceofmoralhazardfromthefinancialsystem.”

TheseideaswerenotendorsedincentralbanknarrativesofCBDC,northroughtheCBDCdesignchoicestheymadeinthemeantime.Centralbanks,likeECB(2023a)declaredthattheywanttopreservetheroleofbanksinmoneycreation,payments,creditprovisionandcreditriskmanagement,consistentwiththebeliefthatadecentralizedandcompetitiveeconomyispreferableanddesignedtheirCBDCaccordingly.MonnetandNiepelt(2023)havecriticizedthisconservativeapproachandre-emphasizedtheaboveperspectiveofDysonandHodge(2016)arguingthatthisapproachis“sacrificingthedigitaleuroonthealtarofbankingasweknowit”andcallforusingaCBDCtorethinkthefractionalreservesystem.

CentralbankshaveoutlinedthepotentialnegativeimplicationsofopeningthecentralbankbalancesheettothepublicviaanunconstrainedCBDCwhichcouldserveaslarge-scalestoreofvalue,andthereby(i)addafurtherdestinationfordepositoutflowsfrombankswhichcoulddestabilisebankdeposits(e.g.BindseilandSenner,2023),(ii)increasecentralbankbalancesheetsandcentralisetosomeextentcreditprovision,anddisintermediatebanksandweakentheirabilitytoprovideaservicetosociety(maturitytransformation;creditselectionandmonitoring),(iii)facilitateinternationalspeculativecapitalflows,e.g.duetotheperceivedsafehavenstatusofspecificcurrencies.ThatCBDCmightfacilitatebankrunsrelativetoaworldinwhichcentralbankmoneycanonlybeaccessed(by

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non-banks)intheformofbanknoteshasbeenrecognizedatanearlystagebycentralbanks.Forexample,CPMI-MC(2018,15)alreadynotedthat:

“Ageneral5purposeCBDCcouldhavealargeimpactonfinancialintermediationpatterns.Theconsequenceofalargercentralbankbalancesheetcouldbeawithdrawaloffundingtocommercialbanks.Forexample,aflowofretaildepositsintoaCBDCcouldleadtoalossoflow-costandstablefundingforbanks,withthesizeofsucha

lossinnormaltimesdependingontheconvenienceandcostsoftheCBDC.….…banksmighthavetoshrinktheir

balancesheets,withpossibleadverseconsequences.”

CentralbankshavesinceacknowledgedthattheywouldneedtolimitpotentialflowsintoCBDCthroughsometools(Bindseil,2020),andallcentralbanksenvisagingtoissueCBDC,includinge.g.theBankofEnglandandtheECB,haveconfirmedthattheywouldplantosetlimitsontheusageofCBDCperholder,implyingtheneedtoassociateallholdingsofCBDCwithanidentifiedholder,soastobeabletomonitortheapplicationofsuchlimits(seeforexamplePanetta,2022,forthedigitaleuro).Centralbankshavementioneddifferentlevelsofpossiblelimits(e.g.theECBhasreferredto3000euroasexample,whiletheBankofEnglandto10-20,000pounds,andthePeople’sBankofChina,PBOC,to10,000yuanforanonymoususecases6).Centralbanksarestudyingindetailthecalibrationoflimits(e.g.Adalidetal.,2022),althoughtheyemphasizethattheeventualsettingofalimitwillrelyonupdateddataclosetotheeventualissuanceofCBDC.

Anadditionalfeatureconsistentlyestablishedbycentralbanks,thatshouldaccordinglybeinvestigatedbymacro-economicmodelsofCBDC,isthenon-remunerationofCBDCs.EarlydiscussionpapersbyEuropeancentralbanks,suchasRiksbank(2017),BankofEngland(2020),BankofCanada(2020),andECB(2020),stilldiscussedremunerationofCBDCasoneoption,whileAguretalnotealreadyin2019(p.3)that“allongoingcentralbankCBDCinitiativescenteronnon-interest-ratebearingCBDC”.Sincethen,allmajorcentralbanksworkingonCBDChaveconfirmedthenon-remunerationofCBDC.

Forexample,PBoC(2021,7)statesthat:“Thee-CNYisasubstituteforM0.Thus,itistreatedthesameasthephysicalRMBunderM0,whichcarriesandpaysnointerest.”Similarly,theBankofEngland(2023)explainsinitsQ&Asondigitalpoundthat:“Likeaphysicalbanknote,andmanycurrentaccounts,nointerestwouldbepaidonadigitalpound.Thismakesitusefulforeverydaypaymentsbutnotdesignedorintendedforsavings.”

5Thereportusestheterm“generalpurposeCBDC”forwhatiscalledintherestoftheliterature“retailCBDC”.6“accountscanholdamaximumof10,000yuananddailyuseislimitedto5,000yuan(625euros).Theamountavailableforuseincreasesiftheregistrantprovidestheirgovernment-issuedresidentidentitycardnumberorlinkstheirwallettotheirphysicalbankaccount.Userscangainunlimitedspendingontheirdigiyuanaccountiftheypersonallyidentifythemselvesatabankbranch.”See

here.

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TheECB(2023,11)states“firmly”thatdigitaleurowillbedevelopedtobenon-remunerated,butalsoreservesitsrighttopotentiallyconsiderremunerationinthefuture:

"ItcannotbestatedfirmlyenoughthattheECBisnotdevelopingaremunerateddigitaleuro.Indeed,asisthecaseforeurobanknotes,theECBdoesnotintendtoremuneratethedigitaleuro,eitheratitslaunchorfortheforeseeablefuture.Banknoteshaveneverbeenremunerated,becauseitisimpracticaltodoso,althoughsuchremunerationisneithertheoreticallyimpossiblenorexpresslyprohibitedbylaw.Givenitsmandatetomaintainpricestabilityandtheconcomitantbasictaskofdefiningandimplementingthemonetarypolicyoftheeuroarea,theECBcannotexcludefuturescenarioswhereremunerationofthedigitaleuromightbewarranted.Also,tofurtheritsmonetarypolicymandate,theECBmustremainincontroloftheremunerationofallliabilitiesonitsbalancesheet.Evenifthisprovisionweretobeinterpretedasanoutrightexclusionofremuneration,thiscouldnot,inanyevent,restricttheEurosystem’sprimarylawcompetencetoindependentlydefineandimplementthemonetarypolicyoftheeuroarea,asthepowerssetoutunderArticle133TFEUareexpresslystatedtobewithoutprejudicetothepowersoftheECB.Forthisreason,anamendmentisproposedtoclarifytheprimacyoftheECB’smandatetomaintainpricestabilityandtheconcomitantbasictaskofdefiningandconductingthemonetarypolicyoftheeuroarea."

Theforeseennon-remunerationofCBDCsmakesthemmoresimilartobanknotesincirculation–andmakesitdifficultformacro-modelstomeaningfullydistinguishthetwoformofcentralbankmoneyinmacro-economicmodels.Somemodelstrytodistinguishthetwoformsofcentralbankmoneywiththeirprivacyfeaturesandfraudrisks,andbasemacro-economicpredictiononthesedifferences.Otherstrytodistinguishthetwoformsofcentralbanksmoneybymodifyingtheutilityfunctionofagentstohavedifferent“baseutilities”fordifferentformsofmoney.Theseissueswillbetakenupinsubsequentsections.

AnothersetofkeyfeaturesannouncedforCBDCswhichwilldeterminethevolumeofCBDCincirculationarethosethatallowtosomewhatdecouplethestoreofvaluefromthemeansofpaymentsfunctionofCBDCandthatfacilitatethepreservationofasinglepoolofmoneyforcitizens,thispoolbeingtheirmaincommercialbankmoneyaccount.Forexample,theECB(2023a)announcedaso-called“reversewaterfall”whichwouldfunctionasfollows(emphasisinboldadded):

“Whileneitheracommercialbankaccountnoralinkbetweensuchanaccountanddigitaleuroholdingswouldbeaprerequisiteforindividualstohaveaccesstodigitaleuroservices,theexpectationisthatmanypeoplewouldfinditconvenientto“link”theirdigitaleuroaccounttoadesignatedcommercialbankaccountforfundingpurposes.Thiswouldmaximisepaymentconvenienceinthefollowingways.

•Itwouldalwaysbepossibletoreceiveapayment,eveniftheamounttobereceivedraisesthedigitaleurobalanceabovetheholdinglimit.Theexcessamountwouldbetransferredautomaticallytothelinkedcommercialbankaccount(waterfallfunctionality).Userswouldalsobeabletosetathresholdforthisautomatictransferthatislowerthantheholdinglimit.

•Userswouldnotneedtoprefundadigitaleuroaccountbeforemakingpayments.Ifthereareinsufficientfundsinthedigitaleuroaccount,theshortfallcouldbetransferredimmediatelyfromthelinkedcommercialbankaccount(reversewaterfallfunctionality).

Anindivid