Remarks by Executive Vice-President Dombrovskis
In more than 20 years of existence, the euro has become a symbol of Europe’s strength, unity and solidarity.
It is a clear European success story.
Since 2002, millions of people and businesses, across Europe and beyond, have got used to euro banknotes and coins.
For many, cash is an important part of their daily lives.
Most want to retain the option of paying with banknotes and coins. And we also want to keep it that way.
Cash will remain widely available.
And that is why the first proposal that we are presenting today confirms the status of euro cash as legal tender.
We want to make sure that people and businesses continue to have access to a public form of money that is accepted across the euro area and easily accessible for everyone.
But that said, people’s habits are definitely changing.
They increasingly choose to pay digitally, with cards and apps such as digital wallets, and contactless. We saw that trend accelerating during the COVID-19 pandemic.
With online purchases growing and people shifting preferences towards the many digital payment methods on offer, cash can no longer support the EU’s economy as it did before.
As Europe moves towards a true digital economy, it is time for the euro to reflect and adapt to the digital age, to keep up with innovation and advances in technology.
A digital euro would be a good and logical complement to cash.
But it would not replace cash.
It would provide a public money alternative to private digital means of payment. A safe, instant and convenient way to pay.
Our second proposal formally establishes the principle of the possible new digital form of the euro, as a complement to euro banknotes and coins. It will then be up to the European Central Bank to decide if, and when, to issue the digital euro.
With the digital euro, people will be able to pay in ‘public money’. Uniquely, they will be able to pay both online and offline.
Having a topped-up digital euro wallet on your phone – or other device – will be the same as having coins and banknotes in your pocket.
You will be able to pay just as easily.
You don’t even need to have an internet connection.
It will be legal tender, backed by the European Central Bank to make it universally accepted across the euro area.
We know that people have concerns about safety and privacy with the digital euro. So we are catering for these concerns.
Personal data would be fully protected.
Banks, not even the ECB, would not see, or be able to trace, people’s personal details or data. Offline payments would offer a similar level of privacy as cash does today.
A digital euro will bring opportunities to banks as well, by allowing them to develop and offer innovative services to their customers.
While people would be able to store digital euros in their device, the amount would be subject to a ceiling as a way to protect financial stability and avoid any substantial deposit outflows from banks.
Those wishing to pay above that ceiling would be able to do so by linking their digital wallet to their bank account.
A few last points – because there are also major strategic interests to consider.
We would not be the first to move to a digital currency.
More than one hundred central banks around the world are preparing for the possibility of central bank digital currencies.
Given that the euro is already the world’s second most-traded currency, it is not an area where can afford to stay behind the curve. We need to move ahead with a digital currency as well.
A digital euro would be strategically beneficial in certain sectors. Retail payments is a good example.
At the moment, two-thirds of Europe’s digital retail payments are processed by a handful of global operators.
Introducing a digital euro would change that.
It would allow European players to participate in a market that is now dominated by foreign companies.
A digital euro would enhance the integrity and safety of European payment systems at a time when growing geopolitical tensions make us more vulnerable to attacks on our critical infrastructure.
By relying on European infrastructure, the system would be better equipped to resist disruptions, including cyberattacks and power outages.
And we do not want to see the euro’s role challenged – either in the EU or outside – by other central bank digital currencies or more risky private sector alternatives like stablecoins.
So there is a clear issue of monetary sovereignty, the stability of the EU financial sector, and enhancing the international role of our common currency.
This is a complex decision.
What we are proposing today will provide the structure and basis for a democratic legislative debate on the digital euro.
And the ECB will develop its work further on that basis.
So we are just at the start.
This is about keeping up with the digital age and making Europe fit for the digital age.
And no matter what form it takes, cash or digital, a euro is – and remain – a euro. Thank you.
Remarks by Commissioner Gentiloni
The second and no less important half of this single currency package is our proposal for a regulation on the legal tender of euro banknotes and coins. So I will concentrate on the present and not on the future.
The objective of this proposal is to safeguard the continued and widespread acceptance of cash throughout the euro area and to ensure that people have sufficient access to cash to be able to pay in cash if they so wish.
Why are we taking this action? Obviously, we know from surveys that there are increasing concerns among the public that cash acceptance and access are declining in parts of the euro area. The situation is different from Member State to Member State bu. The evidence shows that some have experienced a more significant decline in cash acceptance, as well as in ease of access to cash through ATMs. The number of ATMs declined from 420,000 in 2016 to 370,000 in 2022. And cash payments in retail are down to 59% from 72% pre-pandemic, so the decline during the pandemic was quite sharp. The situation is quite diverse across the EU: cash accounts for 70% of transactions in some Member States but less than 20% in others.
We also want to reassure anyone who might be concerned that the digital euro might replace cash, that cash is here to stay. People who choose to will be able to continue to obtain and pay in cash, even if a digital euro is issued in the future by the ECB. This is important for choice, but in particular for vulnerable groups such as older people who tend to rely more on cash.
So what does this proposal do?
It regulates in legislation what legal tender means for the existing, physical form of our currency. While this definition is currently found in an important EU Court of Justice ruling from 2021, this proposal adopted today will codify and clarify it in legislation, to increase legal certainty. This way we also ensure consistency with what legal tender means for a digital euro in future.
One of the key principles of ‘legal tender’ is mandatory acceptance of cash. There can be exceptions, but it is important to ensure that this principle is not undermined by the unilateral imposition of ‘no-cash’ policies on consumers by businesses. The recent ECB SPACE (‘Study on the Payment Attitudes of Consumers in the Euro area’) study showed that four Member States had reported a decline in cash acceptance of 5% (Belgium, Malta, Ireland, Estonia), and two reported a decline of 9% (Latvia and Finland). A Dutch National Bank study recently expressed concern about cash acceptance becoming too low in certain sectors, such as pharmacies (where 12% refuse cash).
Therefore, this Regulation will require Member States to monitor the levels of cash refusals, to report them to the Commission and the European Central Bank and to take measures if widespread acceptance of cash is not ensured. These measures could include for example restrictions on ‘no cash’ policies in certain sectors which are deemed essential (pharmacies for example). As a safeguard, the Commission will be able to require a Member State to take measures where that Member State has taken no, or insufficient, action to ensure widespread acceptance of cash.
Similarly, sufficient and effective access to cash is key to ensure its use. The ECB SPACE study showed a doubling of respondents saying they found access to cash fairly or very difficult and a Eurobarometer study from October showed that up to 13% of citizens find it difficult to withdraw cash.
Therefore, this Regulation will also introduce an obligation on Member States to monitor cash access levels throughout their territory, to report to the Commission and European Central Bank and to take measures if sufficient and effective access to cash is not ensured.
Our proposal leaves some flexibility to Member States to tailor the extent of their action.
So that our legislative framework is future-proof, it also regulates the interaction between euro cash and the digital euro: euro cash and the digital euro shall be convertible into each other at par. It also makes clear that where a merchant will have to accept both cash and the digital euro, the customer will have the right to choose with which form of public money to pay.
In conclusion, by adopting this proposal, the Commission, with the full support of the ECB, is sending a strong message of reassurance to the public that we intend to protect cash and that a digital euro, if and when it will be issued by the ECB, will complement and not replace cash.
Remarks by Commissioner McGuinness
Thank you, Paolo, and I want to repeat that last line. It’s really important to stress how complementary these proposals are.
I want to start first with the digital euro.
So it’s a regulation setting out the essential elements of what a digital euro would have.
And as has been said, we’re working on this for some time, not just with the ECB, but stakeholders in the financial system and outreach to citizens.
So we’re framing the potential roll-out of a digital euro, but that is for the ECB to decide.
And this is the framing of that scenario.
Firstly on legal tender.
We propose to grant the digital euro the status of legal tender, just like cash.
Which means that merchants in the euro area will have to accept payments in digital euro from consumers – with targeted exemptions.
And very much in line with what we’re doing with cash.
And on that point, the proposal on legal tender shows our commitment to cash availability and accessibility.
On the second point, relating to financial stability.
We do want to maintain the role of banks and avoid that the digital euro would lead to banks losing deposits.
Because that would lead to risks on financial stability.
So our regulation asks the ECB to develop tools to limit those risks – which could include a cap on the amount of digital euro someone could hold.
Third point – and an important one – financial inclusion.
People without bank accounts and other vulnerable groups rely heavily on cash for payments.
And that means they face new risks as cash is used less.
Part of this is addressed by the proposal on cash – which will keep cash available and accepted.
But the digital euro is the other part of addressing this.
The digital euro will offer anyone in the euro area an additional form of public money.
Basic digital euro services will be free of charge – like opening or closing a digital euro account.
The digital euro will be easy to use – for example people with disabilities, people who have limited digital skills, or older people.
And you could use the digital euro offline – really important in remote areas where you might not have a reliable internet connection.
Fourthly, on distribution and compensation.
The digital euro would mainly be distributed by private payment service providers.
And they would be able to charge fees to merchants.
But there will be limits on the fees so that merchants aren’t overcharged.
And last but by no means least: privacy.
Because we know this is a concern for citizens.
And I want to say very clearly: this is not a Big Brother project.
For online payments with the digital euro, the data privacy will be the same as for existing private digital means of payments.
For offline payments, the data privacy will be even higher – similar to making an ATM withdrawal of cash.
So in closing, the next steps in this process is the European Parliament and the Member States.
Where already there are discussions as Paolo outlined in many Member States about payments, about the availability of cash and about digitalisation.
And this is also a conversation which will engage our citizens, because all of us use payment services practically once a day if not more.
But I want to be very clear: today we are not announcing that we will have a digital euro.
That decision is solely for the ECB.
But we are saying that we have prepared well, and that’s what this proposal is about.
At the same time, we are making sure that we maintain the vital role of cash in society.
Because for many, cash is king.