A DIGITAL euro could suck away 8 percent of eurozone banks’ customer deposits, analysts at Morgan Stanley have estimated, although the share may be far higher in some of the smaller countries in the 19-nation bloc.

The European Central Bank (ECB) is expected to speed up work on a digital euro in the coming months and although a formal launch could be a few years away, economists are looking at potential implications.

With 90 percent of the world’s central banks now working on digital currencies, a key question is whether they will cannibalize the money currently held in high street bank accounts.

Morgan Stanley’s analysts said their estimates were based on “bear case” scenario where all euro area citizens above the age of 15 transferred 3,000 euros (US$3,637) into what would effectively be an ECB-controlled “digital wallet.”

The amount has been mentioned as a theoretical maximum or cap by some ECB policymakers and market experts.

“This could theoretically reduce euro area total deposits, defined as households’ and non financial corporations’ deposits, by 873 billion euros, or 8 percent,” Morgan Stanley said. (SD-Agencies)