On Wednesday, a survey by the Federal Association of German Community Banks (BVR) found that the introduction of a digital euro could have devastating consequences for the German banking industry. According to the research, if each person were to convert €3,000 to the central bank digital currency (CBDC), only 56 out of 714 institutions would meet legally required liquidity buffers. This would mean that banks would have to look for alternative and more expensive sources of financing.

On the contrary, with an upper limit of €500, only 18 entities would have problems. The BVR suggests this limit because it sees it as a digital version of cash. However, the likely scenario is that not everyone would change the full amount, so the danger may be exaggerated.

Also, as the European Central Bank (ECB director Fabio Panetta and others) pointed out, the purpose of the digital euro is to be a means of payment rather than a form of investment. In a recent interview with German business newspaper Handelsblatt, seen by him in the survey, Panetta reassured banks by saying that the ECB would “ensure that a digital euro does not pose risks to financial stability.”

However, the question of finding alternative funding sources is a hot topic among the banking community, hence the reason to consider holding limits on digital euros. Some countries seem not to care about this problem, such as Russia, which is generally taking a different approach than others in its project to develop a CBDC.

But the digital euro remains a controversial issue in Germany, particularly compared to other European countries. In 2021, the then chief economist at Commerzbank, Dr. Jörg Krämer, called the CBDC initiative an ECB takeover. That year, the German Bundesbank also suggested that it would be better to stick to activation payments rather than a wholesale CBDC. In general, Germany has been less active in wholesale CBDC projects than other major economies, such as France and Spain.

This could become a major obstacle to the digital euro due to the size of the German economy and its population’s longstanding affinity for privacy and security. In a survey on the digital euro published by the ECB in 2021, Germany dominated the report, accounting for 47% of respondents. The most voted feature of a future digital euro was “I want my payments to remain a private matter”.