Governments within the euro currency bloc are set to discuss strategic objectives for the Central Bank Digital Currency (CBDC). The paper, drafted by the secretariat of the Eurogroup, will be put before finance ministers later on Monday.
An early copy of the paper suggests that if the digital euro is deemed legal tender, merchants within the euro area could be required to accept it.refore,
The paper proposes that the CBDC should be given the same status as physical cash. The payments made using the digital euro would legally discharge payment obligations.
Moreover, mandatory acceptance at full face value would also be required. That would increase the digital euro’s network effects, and potentially affect its distribution.
Legal tender status “would imply a legal obligation for (certain) payees to accept payments in digital euro… thereby increasing its network effects, potentially affecting its distribution,” said the document.
However, the paper also highlights the need for exemptions to ensure proportional application, balancing the principles of contractual freedom and mandatory acceptance. That section implies that some payees may be exempted from accepting digital euro payments, depending on certain circumstances.
Earlier, ministers said the digital euro shouldn’t be programmable. Giving the ability to limit how the recipient can use a given payment would impair money’s fungible status. That raises the question of how the digital euro would differ from other cryptocurrencies that can be programmed to limit how funds are used.
The European Central Bank is set to formally decide whether to issue its currency in digital format in the fall. Officials are working on the technical details, including potential uses to prioritize. Any legislation needed to underpin the CBDC will involve EU national governments.
Last week, the European Commission’s Mairead McGuinness confirmed that a bill examining anti-money laundering rules and compensation for those distributing the currency will be released shortly. That will happen alongside confirming the legal tender status of the digital euro.
In a world where cash is no longer king, introducing the digital euro as legal tender would undoubtedly shake things up. It remains to be seen how merchants and consumers alike will react to the mandatory acceptance of the digital currency.
But one thing is for sure – the future of money is digital, and the race to become the dominant player in this new world is well and truly underway.
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