Digital Euro Will Pull Out Traditional Bank Deposits by 8%, Says Morgan Stanley

American investment bank Morgan Stanley analysts evaluate the potential impact of the proposed Digital Euro on the Eurozone member countries.

According to a Reuters report, it was estimated that the launch of the Central Bank Digital Currency (CBDC) would significantly reduce traditional bank cash deposits by as much as 8% on aggregate.

Many central banks around the world are researching the ideas of a CBDC. While this is seen as a positive sign to embrace technological innovation in the payment terrain, how it will disrupt the existing money supply remains unanswered by many apex monetary authorities.

Morgan Stanley's projection gives insight into what countries in the Eurozone might benefit from in the period leading to the launch of the digital euro. The banking giant said its forecasts were based on a "bear case" scenario in which all euro area citizens above the age of 15 transferred 3,000 euros ($3,637) into what would effectively be a European Central Bank-controlled 'digital wallet'. 

"This could theoretically reduce euro area total deposits, defined as households' and non-financial corporations' deposits, by 873 billion euros, or 8%," Morgan Stanley said 

Other experts have noted this figure as the theoretical minimum. The report highlighted that smaller countries in the Eurozone, including Latvia, Lithuania, Estonia, Slovakia, Slovenia, and Greece, could theoretically be impacted harder than the average. In these nations, the projected 3,000 euros could amount to 17%-30% of total deposits and 22%-51% of total household deposits.

Countries developing a CBDC will eventually need to prepare how these will impact existing structures in the nation. With China leading the race in its Digital Yuan development, the country has noted above all else that the new form of money will not spark inflation.

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• digital euro
• cbdc
• morgan stanley