European Commission is committed to the right to use cash as legal tender
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 payment 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 money, by a specific percentage, by levying negative penalty interest (paper 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 counter 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 instrument 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 euro 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:
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: