EC Legal Tender Definitions Fall Short

The European Commission (EC) has published proposals on the legal tender status of cash and a possible future European Central Bank Digital Currency.

Cash: Regarding cash, it says, ‘Today’s proposal aims to safeguard the continued and widespread acceptance of cash throughout the euro area and will also ensure that people have sufficient access to cash to be able to pay in cash if they so wish.’ 

It also says, ‘The proposal will ensure that everyone in the euro area is free to choose their preferred payment method and has access to basic cash services. It will ensure the financial inclusion of vulnerable groups who tend to rely more on cash payments, such as older people.’ 

It will achieve all this by stating, ‘Member states will need to ensure widespread acceptance of cash payments, as well as sufficient and effective access to cash. They will need to monitor and report on the situation and take measures to address any problems identified. The Commission could step in to specify measures if needed.’ 

This cash proposal continues to place the responsibility for defining the acceptance of cash on the member states in line with EC Recommendation 2010/191/EU and the 2021 European Court of Justice ruling in the case of Johannes Dietrich and Norbert Häring v Hessicher Rundfunk (see CPN September 2022), although with direct legislation a future possibility. It does not, therefore, clearly add to the protection of cash.

The result is that this does not clarify the ECJ’s ruling or the status of legal tender. Perhaps the debate in the European Parliament can bring clarity through adding specific requirements.

CBDCs: The European Commission’s paper is bold in its claims for a digital euro, but can those claims really be delivered? Particularly the statement, ‘Basic digital euro services would be provided free of charge to individuals.’

In addition, the proposals make no mention of cross-border payments. If somebody wants to buy something in euros on the internet from outside the EU, will they be able to use the digital euro?

Finally, it appears that the digital euro is being given a broader legal tender status than cash. ‘Merchants across the euro area would be required to accept the digital euro, except very small merchants who choose not to accept digital payments (as the cost to set up new infrastructure to accept payments in digital euro would be disproportionate).’ 

The equivalent for cash might be, ‘Merchants across the euro area would be required to accept cash, except for unmanned places of sale or at anti-social hours (as the cost of infrastructure to accept payments by cash securely would be disproportionate).’