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Morgan Stanley publishes a new report on digital euro

Analysts at Morgan Stanley have evaluated that a digital euro could diminish bank deposits by 8%
Morgan Stanley

Analysts at Morgan Stanley have evaluated that a digital euro could diminish bank deposits by 8%.

Morgan Stanley is an international investment bank and a global leader in financial services. The financial institution headquartered in New York and founded in 1931 published a new report on Tuesday exploring the consequences a digital euro could have on European citizens.

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The European Central Bank is presumed to accelerate its work on the implementation of a CBDC to keep up with other countries that are far ahead on similar projects. In the meantime, analysts are exploring different scenarios to estimate the potential effects of digital money.

Morgan Stanley’s estimate was based on a “bear case” hypothetical plot where citizens of the eurozone older than 15 transferred €3,000 into a European Central Bank e-Wallet. Analysts concluded that this would decrease bank deposits, especially in smaller countries.

morgan stanley digital euro

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

Estonia, Greece, Latvia, Lithuania, Slovenia, or Slovakia are presumed to experience major repercussions. Converting €3,000 of deposits in the central banks of these countries would be the equivalent of 17%-30% of total deposits and 22%-51% of total household deposits.

European countries have been under the spotlight lately due to new plans regarding CBDCs. Last week the central bank of Switzerland announced the collaboration with the central bank of France. The experiment, called “Project Jura” will be focused on bank-to-bank transactions. 

Jura will run on a distributed ledger technology platform which will allow transactions to be immediate. Before they go through, transactions will have to be digitally signed and approved by both central banks of Switzerland and France.

This is the last phase of “Project Helvetia” launched by the central bank of Switzerland, which investigated tokenized assets with wholesale CBDCs. Anyhow, Jura is just in an experimental phase, and it doesn’t mean a digital currency will be issued.

The Swiss National Bank is already investigating the settlement of tokenised assets with wholesale CBDC as part of Project Helvetia. We are looking forward to expanding this analysis to a cross-border context by participating in this exciting initiative.”

Sylvie Goulard, Deputy Governor of the Banque de France
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