European Commission is committed to the right to use cash as legal tender

European Commission is committed to the right to use cashMoney in physical form such as banknotes and coins. More as legal tenderMoney that is legally valid for the payment of debts and must be accepted for that purpose when offered. Each jurisdiction determines what is legal tender, but essentially it is anything which when offered (“tendered”) in payment of a debt extinguishes the debt. There is no obligation on the creditor to accept the tendered payment, but the act of tendering the payment in legal tender discharges the debt. More

Austrian Member of European Parliament, Lukas Mandl, submitted the following question to the Commission on 18 April 2019:

“Time and time again there are reports in the media about attempts to do away with cash as legal tender. Should only electronic paymentA transfer of funds which discharges an obligation on the part of a payer vis-à-vis a payee. More operations be possible in future, there would be a risk — as a result of high negative interest rates — that large sections of the population would effectively be gradually divested of their assets. In addition, the International Monetary Fund (IMF) is now openly considering annual depreciation of electronic moneyFrom the Latin word moneta, nickname that was given by Romans to the goddess Juno because there was a minting workshop next to her temple. Money is any item that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular region, country or socio-economic context. Its onset dates back to the origins of humanity and its physical representation has taken on very varied forms until the appearance of metal coins. The banknote, a typical representati... More, by a specific percentage, by levying negative penalty interest (paperSee Banknote paper. More dated 27.8.2018: ‘Monetary Policy with Negative Interest Rates: Decoupling Cash from Electronic Money’).

Is the Commission totally committed to the right to use cash as legal tender?

Would the IMF’s idea for annual depreciation of electronic money by levying negative penalty interest contravene EC law?

Is the Commission considering taking firm and high-profile action to counterAutomatic device for the counting of banknotes or coins. More the IMF’s notions about depreciation of electronic money through negative penalty interest rates?”

Valdis Dombrovskis, Vice-President of the European Commission in charge of Financial Services gave his response on 20 June:

The Commission acknowledges the fact that cash remains the most popular payment instrumentDevice, tool, procedure or system used to make a transaction or settle a debt. More in the EU and confirms that it remains committed to the right to use cash as legal tender.

The ideas put forward in one of the many research papers of the International Monetary Fund are designed to elicit comments and to encourage debate. The question as to whether the ideas that they contain could contravene EC law is purely hypothetical.

According to the European Commission’s website, “within the euroThe name of the European single currency adopted by the European Council at the meeting held in Madrid on 15-16 December 1995. See ECU. More area, only the euro has the status of legal tender. Article 128 (1) TFEU lays down the legal tender status of euro banknotes, and article 11 of Regulation EC/974/98 does so with regard to euro coins. This means that in the absence of an agreement of the means of payment, the creditor is obliged to accept a payment made in euro which subsequently discharges the debtor from his payment obligation“.

However, the interpretation of legal tender differs from country to country and raises questions such as:

• Can a retailer refuse cash?
• Can a retailer refuse certain denominations?

In 2010, the Commission adopted a recommendation – non-binding – which provides guideleines on the actual implications of legal tender. The guidelines are articulated around 10 principles:

• Banknotes and coins should be accepted for their full face valueThe figure or amount written on the banknote or coin which indicates the amount of its economic value. It is usually written in letters and numbers. More to pay for debts
• Payments in cash should be the accepted rule. This should only be refused because of the ‘good faith’ principle – for example, if the retailer does not have enough changeThis is the action by which certain banknotes and/or coins are exchanged for the same amount in banknotes/coins of a different face value, or unit value. See Exchange. More
• It should be the rule to accept high denominationEach individual value in a series of banknotes or coins. More banknotes
• No surcharges should be imposed on payments in cash
• Countries should not adopt new rounding rules to the nearest 5 cents
• Countries should prevent euro collector coins from being used as means of payment
• Stained banknotes should be brought back to the National Central BanksIn general, the expression refers to the central banks of different countries. More as they might be the product of a theft
• Total destruction of banknotesA process by which a central bank destroys banknotes that are unfit to return into the fiduciary circulation. This is the last step in the life of the banknote. The destruction can be done manually or mechanically, and the latter may be online or offline. Online destruction is directly performed by automated sorting machines, without interruption of the treatment process. The process needs to be controlled in a very special way, since there is no possibility of verification or reconciliation. More and coins by individuals in small quantities should not be prohibited
• Mutilation of banknotes and coins for artistic purposes should be tolerated
• The competence to destroy fit euro coinsshould not belong to national authorities in isolation anymore

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