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Germans Are Skeptical about a Digital Euro and Object to Cash Payment Limitations

Categories : Cash is universal
June 25, 2021
Tags : Cash Payment Limitations, Central Bank, Central Bank Digital Currency, Germany
A Deutsche Bundesbank survey shows that over three quarters of Germans have not heard about a digital euro and over half are skeptical.
Guillaume Lepecq

Chair, CashEssentials

In his opening remarks to the fifth International Cash Conference hosted by the Deutsche Bundesbank, Board Member Johannes Beermann stressed that over half of German households surveyed recently by the Bundesbank expressed skepticism about a digital euro frequent cash users were the most dubious.

The majority of Germans are skeptical towards a digital euro

“There is a strong level of interest in understanding the potential implications of introducing Central Bank Digital Currencies (or CBDC), including what it might mean for the role of cash in the future.” said Beermann. According to the Bank for International Settlements, 86% of the world’s central banks explore CBDCs. Still, so far, the interest and appetite seem limited to a microcosm of central banks and payment experts. “According to the survey,” added Beermann, “at this early stage, 77% of all respondents had not heard or read about a digital euro before. 56% of all households interviewed were, in their initial assessment, skeptical about introducing a digital euro in the future.”

Intensive cash users were the most skeptical towards a digital euro. And while policymakers need to accelerate their communications efforts on both physical and digital central bank money, Beermann stressed that cash would play a role in the future: “In fact, the long-term Eurosystem strategy on cash is clear in that regard: if a digital euro were to be issued in the future, it would co-exist alongside cash.”

The ECB’s governing council is expected to decide whether to push ahead with the preparations next month, and Panetta said it could be ready for use in about five years.

Bundesbank Critical of Cash Payment Limitations

In a separate interview with Handelsblatt, Beermann was highly critical of the European Commission’s plans to impose a €10,000 limit on cash payments. “It is absolutely necessary to intensify the fight against money laundering,” he said. “But it is questionable whether an upper limit of €10,000 for cash payments is the most suitable means, or whether it is not primarily aimed at honest citizens.”

Financial Services Commissioner Mairead McGuiness announced measures against money laundering in May, including limits to cash payments above €10,000.  In 2018, after a two-year consultation, the European Commission decided not to impose EU-wide limitations on cash payments. The Commission concluded in a report on the impacts of restrictions on payments in cash that “While tax fraud and the use of cash are often associated, the study demonstrates that the relationship between the two is not always clear-cut.”

Johannes Beermann emphasized: “So far there has been no scientifically sound evidence that the goal of combating money laundering is achieved with upper limits for cash payments.” This has also been shown by experience in countries in which payments with notes and coins have already reached certain sums are limited. “I therefore consider an upper limit for cash payments to be wrong,” said Beermann.

It seems likely that imposing limitations on cash payments could further undermine public opinion towards CBDCs as consumers may feel they are forcefully nudged away from cash towards digital money. In addition, limitations will also probably apply to the digital euro. In an interview with the Financial Times, Fabio Panetta, Executive Board Member at the European Central Bank, announced that the ECB is planning to impose caps on people’s CBDC funds to €3,000 or impose “disincetivizing remuneration” above that threshold.

Many questions remain on how cash and CBDC can co-exist. CashEssentials plans to host a research seminar on 8 and 9 September and invites submissions of papers. The deadline for submissions is 30 June. Papers should be submitted to glp@agis-consulting.com.

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