ECB paper: high CBDC holding limits pull balances up; a reverse waterfall lifts use, cuts them
Serguey Asael Shinder2 min readA new ECB Working Paper (No 3300, October 2026), "When less is more: behavioral effects of CBDC holding limits", tests how people react to a cap on how much central bank digital currency they may hold. The authors are Thomas Garcia, Claudia Lambert, Cosimo Pancaro, Claire Rimbaud and Alice Soldà; as with all papers in the series, the views are theirs and not necessarily the ECB's.
Why it matters for the euro. Most CBDC projects, including the digital euro, plan a holding limit to protect bank deposits and financial stability. A limit mechanically stops anyone from exceeding a maximum balance, but the authors point out that it may also change behaviour in directions that are unclear in advance: some people may see it as a restriction of their choices and use the CBDC less; for others the limit can act as a reference point that draws holdings towards it.
The experiment. 761 participants from France, Germany, Italy and Spain allocated tokens between two means of payment and then faced automated sellers, earning money if they held the instrument the seller required. One instrument paid interest but was not always accepted; the other paid none, was always accepted and could be subject to a limit — a stylised version of a bank card linked to a deposit account versus a CBDC. The researchers varied the presence and the level of the limit to separate its mechanical effect from behavioural responses, and tested a reverse waterfall: automatic conversion from the bank account into the limited instrument when a payment requires more than the user holds.
What they found.
- Participants whose holdings were already below the limit — who should not have changed anything — on average increased their holdings once a limit was introduced, which the authors call an attraction effect.
- That increase appears only with the higher limit. With a lower limit, attraction and the negative reaction to the restriction offset each other and average holdings stayed unchanged; with a higher limit, the anchoring pull got stronger and the aversion weaker.
- Adding a reverse waterfall both increased adoption of the limited instrument and reduced the amounts held in it.
The authors' conclusion. Combining holding limits with automatic funding mechanisms can support the use of a CBDC as a means of payment while containing holdings, and so help mitigate potential financial-stability risks. The paper presents this as the first evidence of that combination.
The policy context. The digital euro is being designed along those lines. In a speech on 6 October, ECB Executive Board member Piero Cipollone said digital euro holdings would be unremunerated and subject to limits, that users could link them to a bank account with a waterfall and a possible reverse waterfall, and that "behavioural research suggests" this approach could raise adoption while reducing individual holdings. The level of the limit has not been set.
Source: ECB Working Paper No 3300 — https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp3300~0277bae3af.en.pdf ; Cipollone speech: https://www.bis.org/speeches/20261013-money-digital-age-digital-euro-tokenisation-and-role-central-banks