ECB gains backing from Council of EU for caps on digital euro holdings

The European Central Bank (ECB) has gained support from the EU Council for a cap on the amount of digital euro that citizens can hold. This decision stems from concerns that a Central Bank Digital Currency (CBDC) could withdraw funds from traditional banks. The Council emphasizes that the digital euro should primarily serve as a payment mechanism, highlighting the importance of setting limits to prevent capital outflow. This policy marks a critical step toward the implementation of the digital euro, illustrating the central bank's caution in maintaining financial system stability. Ongoing discussions about the potential effects on banks as digital euro usage expands require regulators to strike a careful balance. Future ECB policies and market reactions will be significant focal points for investors.