For ECB President Christine Lagarde, banknotes are “part of our economy, our identity and our culture”. Cash also means social participation and lived freedom – and it is still the German’s favorite means of payment. According to a Bundesbank study, coins and bills are used most frequently – based on the number of payment transactions – with a share of 58 percent, followed by debit cards (23 percent), credit cards (six percent) and direct debits/transfers (four percent). . Internet payment methods account for five percent and NFC technology (Near Field Communication) for two percent of all transactions.
In terms of sales, cash and debit cards are tied at 30 percent each. This is followed by direct debits/transfers at 19 percent and payments by credit card at ten percent. Internet payment methods account for eight percent and mobile payment methods for two percent.
However, the use of cash has declined sharply in recent years. In 2017, 74 percent of all purchases were still made with banknotes and coins; in terms of value, 48 percent was settled accordingly – a decrease of 22 and 37 percent respectively. In addition to the Covid pandemic, the increase in online trade and the simplification of electromagnetic payment methods are the causes.
Lowered cash limits
But also on the part of retail, digital payment methods are sometimes preferred as more cost-effective and because of the information acquisition. In previously rather rare cases, the acceptance of cash is even excluded. The discussion about a cash limit in Germany and Europe, recording obligations under the Money Laundering Act and the confiscation of the 500 euro note are additional government restrictions. The 1,000-franc note renewed in 2019 is now the most valuable banknote in the world. Only one to one hundred dollar bills have been printed in the USA for decades.
With the planned introduction of the digital euro by the ECB, however, fears of a long-term cessation of access to cash are taking on a new dimension. Is there a right to cash? What are the legal limits for restricting the use of cash?
The right to cash is already restricted
The EU has exclusive competence in the area of monetary policy (Art. 3 Para. 1 c TFEU). This allows it to legislate for the member states in this area, for example to set EU-wide upper limits for cash payments. However, there is no clear demarcation of their competences between the member states, which have introduced different national upper limits – from 500 euros in Greece to 10,000 euros in Malta. The ECB has the monopoly to issue euro banknotes as currently the only legal tender (Article 128(1) TFEU). Translated, this means that there is only a basic obligation to accept cash, and the payment is debt-discharging.
This is linked to the guarantee not only of ensuring a sufficient supply of cash, but also of ensuring infrastructure such as ATMs – if necessary through an obligation on the part of the banks. Restrictions for reasons of public interest are still possible under the Euro Implementation Regulation (EC) No. 974/98, as happened with the Anti-Money Laundering Directive and the Cross-Border Cash Control Regulations.
The Member States can also specify modalities for the fulfillment of payment obligations, provided these are proportionate and there are no general restrictions (ECJ judgments C-422/19 and C-423/19). In Germany, this applies to tax payments and the broadcasting fee. In addition, shops can unilaterally exclude cash payments. As a result, the right to cash is already subject to considerable restrictions.
The acceptance obligation should apply consistently for eEuros
The “Draft Regulation on the Introduction of the Digital Euro” (eEuro) presented by the EU Commission at the end of June is suitable for further supplanting cash. In order to ensure broad acceptance of the new legal tender, the obligation to accept the eEuro should apply across the board. Exceptions should only be possible in individually negotiated contractual conditions.
Banks and savings banks must offer all “elementary services” related to the eEuro, and all payment service providers are obliged to process payments with it. Additional fees may not be charged. The customer will bear the costs indirectly via the prices.
The “individually negotiated contract terms” as an excuse
The draft regulation on the legal tender of euro banknotes and coins, which was published at the same time as the eEuro, is more of a tranquilizer from Brussels than a guarantee for future cash use. The “mandatory acceptance at full face value with the authority to free oneself from a payment obligation” alone makes you sit up and take notice. In principle, the eEuro would be suitable for use as a higher-value means of payment compared to euro cash with a surcharge on the nominal value.
Instead of exceptions only for “individually negotiated contract conditions” (as with the eEuro), only “another means of payment must be agreed” – a mention in the terms and conditions would therefore be sufficient. In addition, Member States are “obliged to monitor the extent of unilateral ex ante exclusions of cash payments and to ensure the acceptance of cash in order to comply with the principle of mandatory cash acceptance”. The time required for the determination and any corrections would be extremely long and payment habits are rather irreversible. Nevertheless: From a legal point of view, a complete exclusion of cash payment options would not be permissible.
Prof. Dr. Dirk Meyer teaches economics at the Helmut Schmidt University in Hamburg.
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