SUERF Policy Note - A digital euro:

The more the digital euro resembles cash (high level of privacy, easy to use and not remunerated), the larger the expected substitution out of banknotes and the smaller the overall impact on the size of the central bank’s balance sheet. [...] The lower (upper) range of the estimates corresponds to a scenario where CBDC-specific effects are cash-like 7 The implications of introducing a CBDC for the monetary policy framework and the balance sheet of the central bank are discussed in Abad et al. [...] As long as the expected yield of the assets that finance the lengthening of the central bank’s balance sheet resulting from the introduction of a CBDC exceeds the remuneration of the CBDC, seigniorage would increase. [...] In this section, we review the literature on the impact of a CBDC on bank funding costs and net interest margins as well as the role of competition in the deposit market before turning to the response of the central bank to a possible tightening of banks’ financing conditions. [...] The role of competition in the market for deposits The degree of competition in the deposit and loan markets is a key factor in determining the impact of CBDC on bank intermediation.