Morgan Stanley predicts that the digital euro will pull out 8% of traditional bank deposits

Analysts at Morgan Stanley in the United States assess the potential impact of the proposed Digital Euro on Eurozone member countries.

According to a Reuters report, the Central Bank Digital Currency (CBDC) debut is expected to cut traditional bank cash deposits by as much as 8% on a global scale.

Many central banks throughout the world are looking into the possibility of establishing a CBDC. While many apex monetary authorities regard this as a positive indicator that they should embrace technological innovation in the payment space, many are unsure how it will affect the present money supply.

Morgan Stanley’s forecast provides insight into what countries in the Eurozone might profit from in the run-up to the digital euro’s launch. The bank said its projections were based on a “worst-case” scenario in which all euro zone individuals over the age of 15 transferred 3,000 euros ($3,637) to a European Central Bank-controlled ‘digital wallet.’

Morgan Stanley said:

“This could theoretically reduce euro area total deposits, defined as households’ and non-financial corporations’ deposits, by 873 billion euros, or 8%,”

Several experts have cited this value as the theoretical minimum. According to the analysis, smaller Eurozone countries, such as Latvia, Lithuania, Estonia, Slovakia, Slovenia, and Greece, might theoretically be hit harder than the average. The estimated 3,000 euros might account for 17 percent to 30 percent of total deposits and 22 percent to 51 percent of total household deposits in these countries.

Countries that are constructing CBDCs will need to plan how these would affect existing structures in the country. China, leading the race to build the Digital Yuan, has stated that the new form of currency will not cause inflation.

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