Core Focus: The role of holding limits as the primary safeguard against disintermediation, the “storage-at-scale” problem created by CBDC, and the methodologies for calibrating optimal limits.

In-Depth Notes:
Economists and policymakers have converged on the view that holding limits on CBDC balances are the most important tool for mitigating disintermediation risk. The BIS has developed a framework for understanding the role of holding limits, distinguishing between “storage at scale” and “transactional” use of CBDC.

The “Storage-at-Scale” Problem:
The BIS identifies a critical distinction between CBDC for transactional use and CBDC for storage at scale . A CBDC that is designed purely for transactional purposes—to make day-to-day payments—poses relatively little disintermediation risk. However, a CBDC that can also serve as a store of value on a large scale (storage at scale) is attractive to run to during periods of banking stress. The BIS estimates an optimal holding limit which chokes off fast disintermediation and enhances financial stability by shrinking a fragile banking system .

Calibrating Holding Limits:
The calibration of holding limits is a complex task that must balance competing objectives. The Banco de España has addressed the fundamental methodological issues related to these limits, including the rationale for alternative targets for the limits, the influence of disintermediation speed, the time horizons involved in the limitation and adaptation process, and the role of regulatory and market frictions . An illustrative empirical analysis for the Spanish case indicates that financial stability might not be a concern for reasonable levels of CBDC take-up, although the complexity and novelty of this instrument call for a more in-depth analysis in the future . The ECB’s digital euro plans incorporate a reverse waterfall mechanism that allows payments to be completed even if a user’s digital euro balance is insufficient, by automatically “defunding” from a linked bank account, further mitigating disintermediation risk.

The Two-Tier Structure as a Mitigant:
The two-tier CBDC structure, imposing account-level holding limits, as well as restricting the issuance of interest-bearing CBDC, are considered to be prominent in mitigating disintermediation risks . The OECD study concluded that these design features are essential for facilitating the transition to digital sovereign money without disrupting the deposit-based funding model that underpins bank credit supply .

Zero Remuneration and Holding Limits:
The combination of zero remuneration (making CBDC unattractive as a savings vehicle) and holding limits (preventing large-scale accumulation) is the standard approach across major CBDC projects. This dual safeguard ensures that CBDC remains a payment instrument rather than a competitor to bank deposits.