On 28 June 2023 the European Commission proposed two regulations: one to create the legal framework for a digital euro and one to ensure cash is accepted and accessible. What they say and what is still missing.
On 28 June 2023 the European Commission presented what it calls the “single currency package”: two proposals for regulations that the European Parliament and the Council must now approve. One sets out the legal framework for a possible digital euro; the other regulates the legal tender status of euro banknotes and coins. A proposal does not mean the digital euro will exist: the decision to issue it rests with the European Central Bank (ECB).
The digital euro
It would be a digital form of the euro, issued by the ECB and the national central banks, which would complement cash rather than replace it. It would work like a digital wallet: it could be used to pay in shops and online, and also offline, from device to device. Banks and other payment service providers would distribute it, and people without a bank account could open one at a post office or another public body.
The Commission proposes that it have legal tender status: euro-area merchants would have to accept it, except very small ones that do not accept digital payments. Basic services would be free for individuals, and the fees merchants pay could not exceed those of comparable means such as debit cards or instant payments. Offline payments would offer privacy similar to cash; online payments, the same as current digital means of payment. And it would not be programmable: neither the ECB nor public authorities could limit where, when or on what it is spent.
One point matters particularly to anyone with savings: holding limits. The ECB could set a cap on the amount of digital euro each person may hold, harmonised across the euro area, to protect financial stability and prevent a mass shift of bank deposits. Payments could be of any amount. For offline use, the limits would be set by the Commission through an implementing act, to reduce money-laundering risks.
Cash
The second regulation sets out in writing what it means for euro banknotes and coins to be legal tender. It codifies the Court of Justice’s judgment of January 2021: in principle, the creditor must accept payment in cash at face value, unless the parties have agreed another means or the refusal is made in good faith, and limits on cash payments may be set, for example to combat tax fraud. Member states would have to ensure wide acceptance of and sufficient access to cash, monitor the situation and report every year to the Commission and the ECB.
What is still missing
A great deal. The European Parliament and the Council have to debate and adopt each regulation, and it is common for the text to change. Then, if the digital euro is approved, the ECB would have to decide whether to issue it, when and up to what maximum amount, after a preparation phase. The Commission itself acknowledges that issuance may still take some years.
For businesses and families there is nothing to do today: there are no new obligations and no dates. It is worth following the process on two points, the obligation for merchants to accept it and the holding limits, which will shape how far the digital euro can be used as a store of value. Ask your adviser how it applies to your case once there is a final text.
The digital euro is, for now, a proposal: the law that would allow it and the ECB’s decision to issue it are separate steps.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
