Cash, accounts, and central bank digital currencies: a legal view on the introduction of account- and token-based digital central bank money

ABSTRACT

The introduction of a new form of digital central bank money (Central Bank Digital Currency – CBDC) is actively discussed in the Eurozone. This paper explores different design features of retail CBDC and highlights terminological inconsistencies in the debate surrounding their legal status. It compares CBDC to incumbent forms of money and analyses central questions regarding their introduction from the perspective of European Union law, especially whether the ECB has to power to introduce CBDC and under which conditions CBDC would have legal tender status. For this appraisal, focus is especially put on the interpretation of the notions ‘legal tender’, ‘banknotes’, and ‘coins’ referred to in Art. 128 TFEU; the analysis is supported by experiences drawn from the legal discussion in the United States.

KEYWORDS:

• Central Bank Digital Currencies
• CBDC
• cash
• coin
• banknote
• blockchain
• DLT

A. Introduction

Since their emergence in 2008/2009, ‘crypto-assets’ or ‘crypto-currencies’ have attracted considerable interest in legal research. This is partly due to the fact that crypto-assets like Bitcoin are sometimes described as new, digital forms of ‘money’; in this context, their economic function as money¹ as well as their overall effect on the economy are highly debated.² However, crypto-currencies are only one example of (potential) forms of money that do not possess – like coins and banknotes – a physical manifestation; digital (or, one might say, intangible) forms of money have existed for a long time, the most prominent example being ‘book money’ commonly held in commercial bank accounts (hereinafter: commercial bank money). Among the more recent developments in the ambit of the ‘digitisation’ of money are initiatives of private companies to issue their own forms of digital ‘currency’ – here, special reference is to Facebook’s/Meta’s attempt to create a digital currency called Libra/Diem³ – as well as the debate on the introduction of so-called central bank digital currencies (CBDC). The introduction of CBDC is currently considered by central banks worldwide.⁴ However, important legal questions associated with the introduction of CBDC remain unresolved and need to be further discussed.

The present paper discusses different terminological aspects of proposed retail CBDC models against the background of the status quo in the Eurozone, compares them to incumbent forms of money and considers their introduction from a legal perspective. The paper is structured as follows: Part B provides an overview of the current discussion on the introduction of CBDC. Part C explains the terminology commonly used to described the different ways CBDC can be implemented. Part D discusses terminological ambiguities with regard to CBDC, especially highlighting the difference between token- and account-based variants, and proposes a solution to distinguish between these two forms of CBDC more clearly. On this basis, Part E explores the introduction of CBDC from a legal perspective. Relevant questions include whether the ECB has the power to introduce a CBDC and whether this new form of money would have legal tender status. The analysis is supplemented by the discussion around CBDC and legal tender in the United states since the experiences in this jurisdiction are helpful to shed light on the aforementioned questions.

B. A brief overview of CBDC-related activities in the Eurozone and the United States

The introduction⁵ of CBDC is actively considered in the Eurozone. In 2020, the ECB laid down its understanding and possible perspectives of a digital euro, focusing on a design of a ‘digital euro for use in retail transactions available to the general public’,⁶ as well as the potential role of intermediaries.⁷ In 2022, the ECB confirmed that focus is put on retail CBDC⁸ (CBDC that is available to the general public, see Part C) as well as the integration of intermediaries.⁹ Also, the ECB highlights that two transfer mechanisms will be further explored: first, transactions that are made online and validated by a third party (‘online third-party validated solution’) and second, peer-to-peer validation of offline transactions (‘offline peer-to-peer validated solution’);¹⁰ however, the first solution should not be delayed by the potential unfeasibility of the second.¹¹ The ECB announces that it ‘will review the overall design of a possible digital euro […], once all choices have been made’, also hinting at a possible move to a realisation stage in the following.¹² Nevertheless, this would not imply a decision on the introduction of a digital euro.¹³ In 2023, the ECB issued two additional progress reports, dealing with digital euro access, distribution and functionalities,¹⁴ as well as the cost structure of the digital euro and further design options;¹⁵ the ECB took the decision to move to the next project phase in October 2023.¹⁶ In parallel, the European Commission launched the initiative ‘A digital euro for the EU’.¹⁷ In June 2023, the ‘digital euro package’ was published.¹⁸ The package contains proposals for a Regulation on the establishment of the digital euro (COM(2023) 369 final) and for a Regulation on the provision of digital euro services by payment services providers incorporated in Member States whose currency is not the euro (COM/2023/368 final). A related proposal (COM/2023/364 final) deals with the legal tender status of euro banknotes and coins.

In the United States, the Fed published a paper on CBDC in early 2022.¹⁹ While the Fed regards the U.S. payment system as ‘generally effective and efficient’, it is considering ‘how a CBDC might fit into the U.S. money and payments landscape’, thereby taking a ‘wide range’ of possible design options into account.²⁰ Currently, the Fed plans to explore a CBDC that is ‘privacy-protected, intermediated, widely transferable, and identity-verified’²¹ while highlighting that a digital dollar should be available to the general public.²² At the same time, the Fed invited comments on the potential introduction of a U.S. CBDC.²³ More recently, the White House’s Office of Science and Technology Policy published a technical report on the possible introduction of a U.S. CBDC²⁴ and the Department of the Treasury issued a report on the future of money and payments.²⁵

C. Terminological approaches to CBDC

CBDC are generally defined as a digital form of central bank money.²⁶ Apart from this baseline, a diverse terminology has developed to describe the various implementation models. On the one hand, one typically distinguishes between retail (or general purpose) CBDC and wholesale CBDC; retail CBDC is digital central bank money available to the general public, while wholesale CBDC would only be accessible to certain institutions.²⁷ On the other hand, one distinguishes between token-based (or value-based) CBDC and account-based CBDC. The distinction between these two forms of CBDC can be looked at from different angles; typically, the literature relies on at least three criteria that are, naturally, interrelated and possess several overlaps:

First, one can refer to the CBDC holder’s legal position: account-based CBDC involve an ‘account-relationship’ between the account holder and central bank; such a relationship would not exist in a token-based system.²⁸ Second, one can highlight the process of verification of payment and identification of the payer: while token-based money relies on the payee’s ability to verify the validity of the payment object, account-based money depends on the ability to verify the account holder’s identity.²⁹ An account-based system implies that the user’s holding would be recorded by a third party that would also determine the validity of transactions and update the respective balances;³⁰ in turn, a token-based system (‘bearer CBDC’) means that all payment devices would require users to validate their identities by the use of technical means.³¹ Account-based systems would include both centralised issuance and settlement of the CBDC, whereas in case of token-based CBDC, the settlement leg could remain decentralised with a centralised issuance and destruction of CBDC units.³² The central bank would not offer custodial or transfer services for token-based CBDC, so that other commercial entities could step in to provide these services.³³ Third, one can put emphasis on the storage of data: in an account-based system, the data are stored in a central register and transfers require an amendment of the register; in contrast, a token-based system – also referred to as an ‘(electronic) note-based payment system’ – would store the data locally (e.g. in an app or on a card).³⁴ In this light, token-based CBDC are often associated with a physical device that must be used to transfer the digital tokens.³⁵ At the same time, CBDC tokens can be based on a blockchain/DLT solution. The decentralised circulation of CBDC tokens is often associated with the anonymity of payments.³⁶

Finally, one can distinguish single-tier and two-tier CBDC architectures, depending on whether a particular CBDC model involves intermediaries. Under a single-tier model, the central bank would be responsible for the ongoing management of the CBDC, interacting directly with the public.³⁷ In contrast, under a two-tier model, the central bank issues and redeems the CBDC; intermediaries (such as commercial banks) would be entrusted with the distribution of the CBDC and corresponding payment services.³⁸ However, the terminology varies; sometimes, this model is instead referred to as a ‘hybrid model’, the two-tier form of CBDC (‘synthetic CBDC’) being understood as a liability which is issued by a commercial bank but at the same time fully backed with central bank liabilities.³⁹ However, a ‘synthetic CBDC’ of this type would not – for the absence of a claim on the central bank – constitute a proper form of CBDC.⁴⁰

D. CBDCs’ conceptual issues: incumbent forms of money and the complicated distinction of token- and account-based CBDC

I. On CBDC ‘tokens’ and ‘accounts’

The main varieties of CBDC are often analogised to existing forms of money: a token-based CBDC might be seen as an – albeit digital – form of ‘cash’ and account-based CBDC might be seen as a form of central bank book money; with the involvement of intermediaries, CBDC might be compared to payments using commercial bank money.⁴¹ The distinction between money held in accounts (either commercial or central banks) and cash is indeed well established. Conversely, it has been observed that the distinction of token- and account-based CBDC is not as clear-cut as it might seem: In the first place, even if a token-based CBDC employs a form of DLT, the tokens and corresponding transactions are – very much unlike cash – based on and recorded in a ledger maintained by third parties, just like money in an ‘account’.⁴² Besides, token-based CBDC will very likely not provide the same level of anonymity as cash.⁴³ What is more, the level of protection against fraud and customer-service depends on the implementation of CBDC and does not constitute an inherent difference between CBDC ‘accounts’ and ‘tokens’.⁴⁴

While the foregoing arguments do have their merits and shed light on important technological characteristics of CBDC and DLT in general, it is doubtful whether the distinction between token- and account-based CBDC necessarily ‘breaks down under examination’.⁴⁵ First, also the lines between long established forms of money can blur to a certain extent when looked at from a certain perspective or studied in certain situations. For instance, banknotes that are sent to the recipient by mail or delivery by a transport company are cash transactions, even though such transactions involve a third party; similar principles can be observed in connection with money remittance. Second, also cash payments that may have to be reported (and hence recorded) under applicable laws upwards a certain threshold remain cash payments.⁴⁶ Thus, the fact that cash transactions can have characteristics similar to transactions involving commercial bank money does not mean that these two forms of money should not be distinguished. On a conceptual level, there remains at least one difference that appears to be crucial for the distinction of CBDC ‘tokens’ and ‘accounts’ (and the different forms of money in general). This difference relates to a token-based CBDC’s potential, depending on a corresponding technical implementation, to provide the token holder with a level of control over the tokens equivalent to the owner’s physical power over banknotes or coins kept in her pocket;⁴⁷ this control is ‘direct’ inasmuch no intermediary like a commercial bank is needed to initiate and process transactions.⁴⁸ While tangible tokens (paper, metal) have been the only way to allow a person to exercise direct control over money for the longest time, technological advances nowadays make an equivalent situation – at least in theory – possible for intangible tokens.⁴⁹ At the same time, through this control, the token itself can be regarded as the monetary unit (or a multiple of it) – and is not just a register entry documenting a monetary claim like in case of account-based systems.

Within the realm of intangible tokens, one can distinguish between tokens that are blockchain/DLT-based and ‘regular’ tokens that are stored on physical media.

II. Blockchain-/DLT-based CBDC tokens

Blockchain-/DLT-based CBDC tokens enable the users’ direct control because, given a corresponding technical implementation (that would typically require a high degree of decentralisation in the network),⁵⁰ there is no single intermediary that has the de facto power to decline a transaction in the network and thus would have to be trusted.⁵¹ From this perspective, the person who has the information (commonly called ‘private key’) needed to initiate a transactions directly controls the tokens⁵² – notwithstanding the involvement of the countless network nodes.⁵³ The opposite applies to money held in bank accounts that is analogised to account-based CBDC; here, the functioning of the payment system rests on the reliability of the intermediary insofar as this entity records and settles transactions. Hence, it seems that account-based models are inherently connected to recording transaction in a ledger, whereas token-based models are not. However, on a closer look, this is not the case: transactions (also in ‘fully decentralised’) blockchain/DLT-settings are continuously recorded in a ledger just like transaction in account-based settings, as demonstrated by well-known blockchain-networks like Bitcoin or Ethereum. The existence of a ledger where transactions are recorded is hence not an exclusive feature of account-based CBDC models. Rather, the difference lies in the way the ledger is kept and maintained. Against this background, it becomes apparent that blockchain/DLT-tokens possess characteristics of both cash and money in held in bank accounts: while the user’s direct control makes them comparable to cash, the recording in a ledger as well as their intangibility make them comparable to bank accounts.⁵⁴ In fact, tokens (as understood in the present context) exhibit a hybrid nature, possessing both characteristics of chattels and ledger entries.⁵⁵

A crucial difference that distinguishes token-based CBDC and account-based CBDC can therefore be seen in the CBDC holder’s direct control over ledger entries.⁵⁶ For the concept of ‘direct control’, it seems necessary from a technical standpoint that the implemented ledger solution possesses a sufficient degree of decentralisation; if, in the most extreme case, only one entity (namely a central bank) fully controls the ledger, the ledger entries reflect traditional recording keeping rather than a user’s direct control over CBDC. In such a case, the CBDC appears to be more comparable to bank accounts than to cash, even if the CBDC should be called ‘tokens’.⁵⁷ One could ask whether labelling such a model ‘token-based’ should better be avoided, as this potentially leads to confusion with regard to the concept of ‘tokens’. A CBDC model with a central ledger where token balances are continuously recorded is in fact an account-based system.⁵⁸ Hence, the aspect of ‘direct control’ presented before to distinguish between token- and account-based CBDC is connected to the level of decentralisation of the ledger infrastructure (number of network nodes).⁵⁹ By contrast, the mere fact that third parties (network nodes) are involved in the process of confirming transactions should not be overstated.

III. ‘Regular’ CBDC tokens stored on physical media

As noted before, token-based CBDC are often conceptualised as data stored on a physical medium (e.g. card, smart phone). Under this model, the user’s direct control of the CBDC tokens is ‘indirectly’ linked to the control of the physical storage medium, even though the device might have certain security features such as a password.⁶⁰ Such ‘regular’ digital tokens are inherently different from blockchain-/DLT-based tokens because they are stored on a single device while the latter are stored in a decentralised ledger. This has important consequences: the decentralised ledger infrastructure ensures that tokens cannot be copied at will; this technology was developed precisely to solve the double-spending problem.⁶¹ In contrast, ‘regular’ digital tokens can be, in principle, freely reproduced. This problem is by no means new and has occurred in earlier approaches to ‘digital currencies’⁶² but can also be observed in other contexts.⁶³ However, this implies that tokens of this kind are different from cash because banknotes and coins cannot be copied at the owner’s discretion. Technical means can be implemented to prevent copying but this does not change the token’s inherent properties; furthermore, there remains the problem of circumvention of the technical barriers. In this light, it is questionable whether a CBDC based on tokens stored on physical media would be feasible without the involvement of an intermediary. While the transaction (e.g. copying the token to the payee’s device and deleting it from payer’s device) themselves might be decentralised (peer-to-peer), the system would likely require a certain type of ledger maintained by an intermediary (e.g. central bank);⁶⁴ in spite of the reproducibility of the digital tokens, the intermediary must be in the position to control the total amount of circulating digital units and, at the same time, validating who owns what amounts of digital units must be possible.⁶⁵ Thus, to the extent tokens and transactions are recorded in a ledger under the control of the central bank (or another intermediary) to prevent double-spending, the model possesses features akin to account-based CBDC.

IV. The legal relationship between account holder and central bank

As highlighted before, the legal relationship between a CBDC holder and the central bank is frequently mentioned as a characteristic feature of account-based CBDC. This distinction mirrors the legal differences of cash and commercial bank money: only the latter is based on a contractual relationship between the account holder and the bank with a corresponding claim to the payment of the account balance in central bank money (cash); this implies that the account holder bears the commercial bank’s insolvency risk. These principles do not translate well to account- and token-based CBDC: a claim that could be derived from an account-based CBDC would be a claim to exchange the CBDC balance for other forms of central bank money and not for other assets, like gold for instance.⁶⁶ At the same time, it is quite possible that also token-based CBDC can be exchanged for other forms of central bank money. Since the debtor would be the central bank in any case, the insolvency risk associated with (‘regular’) commercial banks is not practically relevant.⁶⁷ Furthermore, if a central bank were to emit tokens, it would need to safeguard the transferability of these tokens – be it by use of a DLT, physical devices or other technological solutions – even absent a direct contractual relation to the token holder because the emission of non-transferable CBDC-tokens would be a fruitless effort.⁶⁸ In this light, the existence of an ‘account-relationship’ does not seem to be a criterion that is as compelling for the distinction of token-based and account-based CBDC as for the distinction of cash and commercial bank money. In this connection, it has been argued that the popular distinction between token- and account-based money ‘is thus less a distinction between kinds or types of money, in any natural kind sense of those words, than it is between layers in the same money hierarchy associated with public and private obligees’.⁶⁹ Absent intermediaries/commercial banks, the distinction between tokens and accounts becomes indeed less apparent.

V. Interim conclusion

The analysis has shown that token- and account-based CBDC can be distinguished by the criterion of the direct control of the CBDC holder. Hence, following this understanding, token-based CBDC – that, from a technical perspective, would generally have to be based on a decentralised blockchain/DLT network or a suitable physical device with the ability to prevent double-spending to guarantee direct control – indeed possess important features of cash, while account-based CBDC would be akin to money recorded in bank accounts due to the reliance on intermediaries. However, these similarities do not, by themselves, mean that token-based CBDC can be regarded as cash or that account-based CBDC can be qualified as central bank accounts from a legal perspective. Whether this is case must be assessed with reference to the applicable laws; the following takes a closer look at this question. As will be shown, the aspect of direct control indeed plays an important role for the legal appraisal.

E. The introduction of a retail CBDC from a legal perspective

I. General remarks

The introduction of the CBDC raises two separate legal questions that should be distinguished.⁷⁰ The first question relates to the introduction of digital central bank money itself: Does the central bank (or possibly, other authorities) have the power to introduce a particular form of a CBDC?⁷¹ The second question relates to the legal qualification of a CBDC, especially with regard to its legal tender status. Yet, both questions are interrelated insofar as they imply the appraisal whether a particular form of CBDC falls within the concepts contained in the law as it stands or whether legislative amendments are required. This task is far from trivial, especially since the monetary laws relevant for the present purposes (still) often have (or, at least, originally had) physical forms of money in mind. Therefore, it might be doubtful – even if a certain form of CBDC functionally corresponds to an incumbent form of money – whether the existing laws cover the introduction of such a CBDC. At the same time, however, it cannot be denied that money, in general, has long been regarded as being dissociated from physical tokens.⁷²

II. Legal background of money

1. The concept of ‘money’

From an economic perspective, ‘money’ is generally defined by three main characteristics: it functions as a means of payment, as a unit of account and a store of value.⁷³ From a legal perspective, the term ‘money’ has not received a uniform definition. Whereas assets like commercial bank money and bitcoins might be understood as ‘money’ in certain contexts, the same might not be true in other contexts; here, it is important to distinguish economic and legal concepts, while there also exist different conceptions of ‘money’ also in the legal sense. Thus, what can be considered as money depends on the context one is referring to (e.g. law of contracts, property, tax law or constitutional law).⁷⁴ For instance, the Uniform Commercial Code (UCC) contains a special definition of ‘money’.⁷⁵ The act addresses bank deposits and collections as well as funds transfer in its Art. 4 and Art. 4A. Furthermore, important rules on electronic fund transfers are contained in the Electronic Funds Transfer Act of 1978.⁷⁶ In the EU, an important instrument of secondary law dealing with the different forms of money is the PSD II;⁷⁷ this directive is fundamentally based on the definition of ‘payment transactions’ (Art. 4(5) PSD II) which in turn rests on the definition ‘funds’ (Art. 4(25) PSD II) which means ‘banknotes and coins, scriptural money or electronic money’. The E-Money-Directive II lays down the conditions for the activity of issuing ‘electronic money’.⁷⁸

On a general level, one can distinguish between central bank money, commercial bank money and nonbank money.⁷⁹ While the legal assessment of the different types of money can vary according to the applicable private law, commercial bank money is generally understood as a claim against a bank, typically not entailing a property right in specific physical banknotes or coins.⁸⁰ In contrast, central bank money is generally defined as a liability of a central bank (Fed, ECB).⁸¹ Both in the U.S. and the Eurozone, central bank money exists in the form of accounts at the central bank and physical currency (banknotes and coins); while the first is only available for certain institutions (especially banks), cash can be used by the general public.⁸² Despite the ‘direct’ involvement of the central bank, it should be noted that central bank money is not – neither in the U.S. nor the Eurozone – synonymous with the concept of legal tender. As will be seen, central bank money can (and very often is) legal tender but that does not have to be the case; this is illustrated, e.g. by accounts held at the ECB that do not join legal tender status (cf. Art 128 TFEU).⁸³ From a conceptual point of view, a legal system might also decide to confer legal tender status on (‘private’) forms of money that do not entail a liability of the central bank or a liability against anyone at all.⁸⁴ To be clear, however, this is currently the case neither in the Eurozone nor the United States.

2. Money and constitutional rules⁸⁵

Art. 3(1)(c) TFEU grants the Union the exclusive competence in the area of ‘monetary policy for the Member States whose currency is the euro’.⁸⁶ For being an exclusive competence, Member States may not enact legislation in this area (even absent legislation on the level of the Union), unless so empowered by the Union or for purpose of implementing Union acts (Art. 2(1) TFEU).⁸⁷ With a view to Art. 127(1) and Art. 282(2) TFEU, the ECJ has held that the primary objective of the Union’s monetary is to maintain price stability.⁸⁸ In order to determine whether a measure falls within the area of monetary policy, the court generally refers to the objectives of that measure.⁸⁹ Art. 128(1) TFEU (ex 106 EC) provides that the ECB has the exclusive right to authorise the issue of euro banknotes in the EU; the ECB and national central bank may issue such notes. Banknotes issued accordingly are the only banknotes that enjoy legal tender status.⁹⁰ Furthermore, Member States may issue euro coins while the volume of the issuance is subject to approval by the ECB (Art. 128(2) TFEU). Together with the national central banks, the ECB – itself one of the Union’s institutions (Art. 13 TEU) – forms the European System of Central Banks (ESBC) (Art. 282(1) TFEU). Further rules on the ECB and the ESCB are set forth in a protocol annexed to the EU treaties (‘ESCB/ECB Statute’; cf. Art. 129(2) TFEU).

The U.S. Constitution provides Congress with a variety of powers in the ambit of finance and currency matters, especially to ‘coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures’ (U.S. Constitution Art. I, § 8, cl. 5 – ‘Coinage Clause’).⁹¹ According to the Supreme Court’s case law, the U.S. Constitution gives Congress wide discretion in monetary affairs.⁹² Somewhat surprising in light of the fundamental importance of the issue for the U.S. financial system, the reach of the Congress’s power in this area has not always been uncontroversial, however. A string of cases – often referred to as the ‘legal tender cases’⁹³ – dealt with the question whether Congress had the right to declare paper money legal tender. The Supreme Court eventually answered in the affirmative;⁹⁴ yet, while the conclusion reached by the court can be considered as generally accepted today,⁹⁵ the issue has not been entirely put to rest in the legal literature, as shown by critical publications that emerge from time to time.⁹⁶ One explanation might be that the issue relates to fundamental questions on the interpretation of the U.S. Constitution itself.⁹⁷ The Federal Reserve System is not established by the U.S. constitution but in the Federal Reserve Act.⁹⁸

3. The concept of ‘legal tender’

The concept of legal tender possesses importance for the present purposes insofar as both the ECB and the Fed are studying the implications of CBDC that would have legal tender status.⁹⁹ On a general level, legal tender status is usually defined with regard to a debtor–creditor-relation: by using legal tender, a debtor can validly discharge of her monetary obligation.¹⁰⁰ This principle does not necessarily mean that legal tender is the only way to extinguish a monetary obligation, as there might other means of payments the law recognises for this purpose; however, legal tender is the means of payment that the creditor must accept.¹⁰¹ Thus, legal tender can generally be understood as the form of payment the debtor can choose to provide to her creditor. Yet, the concept legal tender possesses several more detailed nuances on a closer look. On the most basic level, one can ask what forms of money are recognised as legal tender. For instance, while banknotes and coins – important forms of central bank money – are recognised as legal tender in many jurisdictions, money held in central bank accounts generally¹⁰² is not.¹⁰³ On a more subtle level, one can ask what kind of obligations can be discharged by using legal tender.¹⁰⁴ The most obvious way to create a monetary obligation might be a contract: one party promises to provide the other party with money. Since the basis for this obligation is a contractual nature, private law doctrines apply and the law can employ different legal mechanism to make creditors comply with the obligation to accept legal tender.¹⁰⁵ Other forms of monetary obligations are created by order of the government, the most straightforward example being tax liabilities. Sometimes, the currency in which taxes are paid are distinguished from legal tender, being referred to as ‘functional currency’.¹⁰⁶ Finally, the law can stipulate exceptions to the legal tender status, i.e. cases in which the creditor is not obliged to accept legal tender.¹⁰⁷

The most common forms of legal tender are banknotes and coins, i.e. physical forms of money.¹⁰⁸ This is reflected by U.S. law, stating that ‘United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues. Foreign gold or silver coins are not legal tender for debts’.¹⁰⁹ On the other side of the Atlantic, Art. 128(1) TFEU states that the ‘banknotes issued by the European Central Bank and the national central banks shall be the only such notes to have the status of legal tender within the Union.’ While Art 128(2) TFEU does mention euro coins, it does not provide for legal tender status; rather, the legal tender status of euro coins is based on Art. 11 Council Regulation (EC) Nr. 974/98.¹¹⁰ Thus, EU law regulates the legal tender status of banknotes – unlike U.S. law – on the constitutional level, while the legal tender status of coins is based on secondary law.¹¹¹ Conversely, there is no provision in EU law that declares commercial bank money legal tender status;¹¹² the same applies to electronic money. However, this does not mean that monetary debts cannot be discharged with commercial bank money at all in the Eurozone. In fact, the wording of Art. 128 TFEU was chosen precisely to provide the Member States with some leeway to allow for other means to extinguish such a debt.¹¹³ A frequently cited example is Dutch law with regard to commercial bank money.¹¹⁴ Therefore, in principle, one must look at the private law of the Member States whether commercial bank money or other forms of money can lawfully be tendered to the creditor of a monetary debt. This does not contradict the concept of legal tender because a debtor has, based on EU law, the option to rely on cash to discharge of her debt; in principle, the laws of a Member States can, however, provide her with further options to do so.

As for the types of debts that can be paid off by using legal tender, 31 U.S.C. § 5103 provides for a wide understanding, generally referring to ‘all debts’, ‘public charges’ and so on. Accordingly, it appears that the legal tender status refers to both monetary debts that derive from private law, as well as those that stem from public law (like taxes, for instance).¹¹⁵ The language of the EU law is less clear in this respect: Despite its fundamental importance, both Art. 128 TFEU and Art. 16 ESCB/ECB Statute refer to ‘legal tender’ without further specifying this concept; the situation is similar with regard to secondary law.¹¹⁶ Thus, EU law regulates what legal tender is (banknotes and coins) but does not specify what legal tender means; from the language of the law, it is unclear what kind of monetary debts can be settled by using legal tender, or if the European concept refers to a debtor–creditor-relation in the first place. The ambiguities in EU law as to the term ‘legal tender’ caused the European Commission to issue a recommendation in 2010.¹¹⁷ According to the recommendation, the term ‘legal tender’ entails three elements: (i) mandatory acceptance, meaning that the creditor of a payment obligation cannot refuse euro banknotes and coins (unless the parties have agreed on another means of payment), (ii) acceptance at full face value, meaning that the monetary value of euro banknotes and coins is equal to the amount indicated on these notes and coins, and (iii) power to discharge from payment obligations, meaning that a debtor can discharge himself from a payment obligation by tendering euro banknotes and coins.¹¹⁸ In 2021, the ECJ confirmed important parts of the Commission’s approach to the concept of legal tender.¹¹⁹ Referring to its ‘ordinary sense’, the court understood legal tender as a means of payment denominated in a currency unit that ‘cannot generally be refused in settlement of a debt denominated in the same currency unit, at its full face value, with the effect of discharging the debt’.¹²⁰ It follows from the ECJ’s ruling that legal tender can be used to pay off debts of both a private law and public law nature.¹²¹

The question of exceptions to the legal tender status entails several sub-issues that should be distinguished. First, it should be noted that the legal tender status of a means of payment does not necessarily imply that a person must in fact accept this means of payment for goods or services she offers. In this vein, the U.S. Department of the Treasury states that ‘there is no federal statute which mandates that private businesses must accept cash as a form of payment. Private businesses are free to develop their own policies on whether or not to accept cash unless there is a state law which says otherwise.’¹²² Thus, on the one hand, the parties of a transaction are generally free to agree to exchange goods for other goods or services. Since in this case the parties do not agree on a monetary debt – no money is owed¹²³ –, such a transaction in fact does not concern the concept of legal tender and, therefore, does not, in a strict sense, concern an exception to the legal tender status of cash. On the other hand, the parties may agree to settle a monetary debt with forms of money that do not possess legal tender status. A practically relevant case is the (implicit or explicit) agreement to pay the debt with commercial bank money. As the parties want to exclude the payment of cash, an agreement of this kind may be understood as a contractual limitation to legal tender status of cash, the permissibility of which depends on the applicable law.¹²⁴ While this question was not explicitly addressed by the ECJ in Dietrich and Häring, there should be no doubt that, from the perspective of EU law, the parties can freely agree on a monetary debt that can be settle with commercial bank money.¹²⁵

However, in reference to the recommendation of the Commission mentioned above, the ECB states that retailers must provide a ‘legitimate excuse’ when refusing cash payments.¹²⁶ According to the author’s opinion, this should not be understood as a limitation to the parties’ freedom to agree on non-cash payments; rather, a ‘legitimate excuse’ (a justification) is necessary in absence of an agreement to this effect.¹²⁷ In this connection, the applicable private laws might very well consider labels or posters displayed by the retailer as a sufficient basis for the (at least implicit) contractual exclusion of cash payments.¹²⁸ As a general observation, one might wonder why the ECB (and the Commission in its recommendation) put their focus on the retailer-consumer relation when describing the concept of legal tender; why must exactly retailers provide an excuse for refusing cash payments, while other situations are not addressed (e.g. C2C payments)? Although consumer protection has an important position in EU law (cf., e.g. Art. 12, 169 TFEU), there is no indication that Art. 128 TFEU specifically aims at regulating the dealings of retailers or protecting consumers.¹²⁹ Admittedly, however, payments between retailers and consumers are among the most relevant examples for the continuing popularity of cash payments (at least in some EU Member States).

A different question is whether the law itself limits the effects of the legal tender status, i.e. obliges a party to accept something other than legal tender for the payment of a monetary debt. In the EU, this also implies the question to what extent the Member States may provide for rules of this kind. In Dietrich and Häring, the ECJ held that the legal tender status of euro notes and coins is not absolute and leaves room for the Member States to introduce exceptions (e.g. a monetary debt that can only be paid off with commercial bank money), provided they are duly justified.¹³⁰

Finally, it should be noted that the concept of legal tender – very much like the concept of money – depends on the context it is used in. So far, reference has been made to the concept of monetary laws as well as their implication for contractual obligations. However, the term of legal tender can also be relevant, e.g. in the context of tax law. This is illustrated by the ECJ’s decision in Hedqvist, where the court deemed bitcoins ‘legal tender’ within the meaning of Art. 135(1)(e) VAT-Directive,¹³¹ mainly because it ‘has no other purpose than to be a means of payment and that it is accepted for that purpose by certain operators’.¹³² This deserve two immediate remarks: First, the decision only applies to the specific tax law context in which it is handed down; in the context of EU monetary law, bitcoins are not certainly not legal tender in the Eurozone (and the same applies to the U.S.).¹³³ Second, at least from today’s perspective, the premise of the ECJ’s decision must be questioned. This is because it is nowadays widely acknowledged that bitcoins (as well as many other crypto-assets) do have a purpose other than being used as a means of payment, namely their use as an object of speculation.¹³⁴ Thus, one might doubt if it is correct to say that bitcoins have ‘no other purpose than to be a means of payment’. Whether this observation would have caused the ECJ to rule differently in Hedqvist is, of course, another matter.

III. CBDC as a form of central bank accounts

As noted, central bank accounts are, for the time being, generally not available to the public. U.S. law enumerates several entities that are eligible for such accounts,¹³⁵ e.g. U.S. depository institutions.¹³⁶ Thus, as summarised by the Fed, the ‘Federal Reserve Act does not authorise direct Federal Reserve accounts for individuals, and such accounts would represent a significant expansion of the Federal Reserve’s role in the financial system and the economy’.¹³⁷ In other words, providing retails retail access to Fed accounts requires additional legislation.¹³⁸ In the Eurozone, Art. 17 ESCB/ECB Statute states that, in order to conduct their operations, ‘the ECB and the national central banks may open accounts for credit institutions, public entities and other market participants and accept assets, including book entry securities, as collateral.’ Whether retail access to central bank accounts is compatible with the law as it stands hence depends on the meaning of the term ‘other market participants’; if one understands a consumer to be a ‘market participant’, the law would, in principle, support the introduction of retail accounts.¹³⁹ The wording, even though not entirely unambiguous, seems to refer to financial market institutions and not the general public or households, however.¹⁴⁰ One can also observe that the provision does not refer to the ‘public’ as such.¹⁴¹ The ECB’s understanding is somewhat unclear: on the one hand, the ECB considers Art. 127(2) TFEU in connection with Art. 17 ESCB/ECB Statute as a legal basis for the introduction of a digital euro available to households and other private entities; at the same time, the ECB states that this ‘cannot serve as the sole legal basis’.¹⁴² On the other hand, the ECB mentions Art. 127(2) TFEU and Art. 17 ESCB/ECB Statute (as well as Art. 20, 22 of the same statute) when referring to ‘the issuance of digital euro variants for limited uses, devoid of general legal tender status’.¹⁴³ Thus, it seems that the ECB’s opinion is as follows: While the introduction of retail central bank accounts is not as such prohibited by primary law,¹⁴⁴ conferring legal tender status (and possibly also retail access) to such a form of money would require further legislation. In this light, the ECB’s opinion is in line with a purely textual reading of Art. 17 ESCB/ECB Statute, whereas certain doubts about the meaning of the expression ‘other market participants’ remain.

It should be noted that the question who can open an account with the central bank is not the only issue to be considered when discussing account-based retail CBDC. Even if existing provisions of U.S. or EU law were to be expanded to expressly include households or private entities, one would have to verify whether a certain form of CBDC fulfils the other requirements of these provisions. After all, Art. 17 ESCB/ECB Statute allows the ECB to ‘open accounts’; 12 U.S.C. § 342 refers to ‘deposits’. In other words, one must not only ask whom the central bank may offer its services but also what it may offer. This is a relevant consideration in light of the various different models for the implementation of CBDC. Consider, for instance, a CBDC design where private users cannot directly access their CBDC accounts with the central bank but need to rely on the services of (new or incumbent) intermediaries; some proposals of CBDC are built around a ledger maintained by the central bank that only records anonymous balances while further data is within the control of intermediaries.¹⁴⁵ Since this way of maintaining ‘accounts’ appears to be different from existing forms of central bank accounts, it might be unclear whether such CBDC models actually involve ‘accounts’ within the meaning of the law as it stands.¹⁴⁶ The foregoing implies that an analysis is necessary if a given CBDC design fits within the meaning of the current statutory understanding. Should a particular CBDC design not clearly be covered by this understanding, an amendment of the law should, for the sake of legal certainty, not only expressly mention the accessibility of private entities but also the admissibility of the new form of central bank money.

To a certain degree, the present questions mirrors distinction between token- or account CBDC. As implied earlier, the mere fact that CBDC balances are referred to as ‘tokens’ should not rule out the existence of an ‘account’ within the meaning of a provision like Art. 17 ESCB/ECB Statute. Moreover, it is doubtful whether a very narrow reading of a provision of this kind is warranted since this might confine the options of central banks to flexibly respond the technological or economic developments. Nevertheless, CBDC that take the form of blockchain-/DLT-based tokens or of ‘regular’ tokens as described above would only uneasily satisfy the requirements for an ‘account’.¹⁴⁷ This is because, on the one hand, offering accounts typically implies that the central bank has the power to update the account balances and this is not the case for blockchain-/DLT-based tokens (at least if they are based on a ‘fully’ decentralised architecture); here, the central bank would rather provide a technical infrastructure, while the power remains with the token holder. On the other hand, accounts imply that transactions are continuously recorded in a ledger which is not (necessarily) the case for ‘regular’ tokens stored on a physical media.

IV. CBDC as a form cash

1. The broad interpretation of the U.S. ‘Coinage Clause’ and the ambiguous meaning of Art. 128 TFEU

It is common knowledge that the use of cash as a means of payment is not restricted to a particular group of persons. Thus, different from what was discussed above in connection with central bank accounts, it is not problematic whether a CBDC that can legally be regarded as cash may be accessible to the general public. Rather, the crucial issue boils down to under what circumstances a CBDC in fact can be regarded as cash under the law as it stands – or, put more generally, whether the same rules that apply to cash can also be applied to a certain form of CBDC. For this appraisal, two basic scenarios are conceivable. If one can establish that a certain rule of monetary law refers to physical things (chattel),¹⁴⁸ thereby following a rather formalistic approach, the application of that rule to CBDC is not warranted at the outset. Conversely, if it is found that rule can be interpreted in a more flexible manner allowing for a functional reading, applicability will depend on a functional comparison of traditional forms of cash – that were known at the time of rule’s enactment – and the CBDC design in question. With regard to the U.S. constitution, some have argued in support of a narrow reading of the Coinage Clause. In the nineteenth century, Justice Field stated in his dissent in Juilliard v Greenman:

The clause to coin money must be read in connection with the prohibition upon the States to make anything but gold and silver coin a tender in payment of debts. The two taken together clearly show that the coins to be fabricated under the authority of the general government, and as such to be a legal tender for debts, are to be composed principally, if not entirely of the metals of gold and silver. […] When the Constitution says, therefore, that Congress shall have the power to coin money, interpreting that clause with the prohibition upon the States, it says it shall have the power to make coins of the precious metals a legal tender, for that alone which is money can be a legal tender. […] Now, to coin money is, as I have said, to make coins out of metallic substances, and the only money the value of which Congress can regulate is coined-money, either of our mints or of foreign countries.¹⁴⁹

While this interpretation is based on both textual and systematic arguments, it might be seen as formalistic insofar as it defines the forms of money covered by the Coinage Clause with reference to the material it is made of: metallic substances or precious metal. However, via the limitation to metal tokens, Justice Field also highlights a functional aspect. This aspect is expressed as the ‘standard of value’-function of money that, according to his reasoning, cannot exist in things that do not have intrinsic value.¹⁵⁰ While it can be questioned whether or to what extent only things that possess intrinsic value can function as a standard of value, this approach reveals a crucial point that is also relevant for the current purposes: it is not enough to ask the general question if a certain form of CBDC is comparable to cash (coins) in one way or another. Prior to this assessment, one must determine the characteristics of cash that are actually relevant for the provision in question; then, as a second step, one can determine whether another form of money has equivalent characteristics. The prevailing view in the United States on the Coinage Clause seems to be that the aspect of intrinsic value – which is an important characteristic of precious metals – is not a crucial feature of ‘money’. Otherwise one could not reach the conclusion that paper money could be covered by the Coinage Clause because the paper’s intrinsic value is negligible. Likewise, a (token- or account-based) CBDC does not have intrinsic value like precious metals. Thus, from this perspective, there are good arguments for treating CBDC like paper money under the U.S. Constitution’s Coinage Clause.

At first sight, Art. 128 TFEU’s wording appears to be, compared to the U.S. Coinage Clause,¹⁵¹ broader because it expressly addresses both coins and banknotes; thus, there can be no doubt that banknotes are covered by the provision. However, at the same time, the wording is limited¹⁵² insofar as it refers exclusively to two forms of money that have traditionally been represented by physical tokens.¹⁵³ Hence, two questions for the introduction of CBDC arise: first, can a banknote or a coin be of a non-tangible nature? Second, provided that physical tokens are not required, would a particular CBDC design qualify as a banknote or a coin under the TFEU?

With regard to the first question, it can be argued, that – based on the plain meaning of the words – ‘banknotes’ and ‘coins’ do not cover any type of CBDC.¹⁵⁴ According to this line of argumentation, a physical token made of paper, metal or comparable materials is a necessary requirement for banknotes and coins within the meaning of Art. 128 TFEU. However, other commentators reject a pure literal understanding of the treaty and apply a functional reading.¹⁵⁵ The ECB states that ‘if the digital euro were to be issued as an instrument equivalent to a banknote, then the most expedient legal basis for its issuance would be Art. 128 of the TFEU in conjunction with the first sentence of Art. 16 of the Statute of the ESCB’.¹⁵⁶ Again, the discussion comes down to what the relevant features that banknotes (and coins) are that must be compared with a particular CBDC design. In this connection, it is argued that a CBDC would have to be ‘functionally 100% equivalent to the existing cash, to say the least’.¹⁵⁷ This would imply that the CBDC would have to be a) issued subject to the authorisation of the ECB, b) denominated in euro, c) useable without disclosing or identifying its owner, d) transferable without involving an intermediary and additional costs, e) a permanent storage of value that is unlimited in volume, f) accepted by all government entities.¹⁵⁸

2. Denomination, intermediaries, and ‘additional costs’

Without doubt, a digital euro ‘banknote’ would have to be denominated in euro and function as a storage of value. However, the other enumerated functionalities of banknotes deserve a closer analysis. With regard to point d) referenced above, it is one of the core features of decentralised DLT-networks that one does not has to rely on an intermediary to carry out transactions. The holder controls her assets directly and – different to ‘regular’ data – the tokens cannot be copied at will.¹⁵⁹ For that reason, ‘crypto-currencies’, ‘blockchain-tokens’ and the like are often compared to cash.¹⁶⁰ Thus, if a CBDC in question possesses these characteristics, it is reasonable to considered them equivalent to traditional forms of cash, at least from this perspective.¹⁶¹ This would apply to blockchain-/DLT-based tokens as described above, but potentially also to ‘regular’ tokens stored on physical media provided there is an effective technical solution to prevent double-spending while maintaining the user’s direct control of the tokens. This argument is not called into question by the ‘additional cost’ argument since this is not an exclusive feature of cash: if a person goes to her favourite restaurant around the corner, the cash payment will be fast and practically cost-free. However, what if a company located in Athens wants to use its legal tender tokens to pay a Parisian contractor?¹⁶² Transferring cash from Athens to Paris is both slow and comparatively expensive, as one would have to physically move the money to the location of payment, very likely by relying on third parties (especially postal services or money remittance providers). In fact, using blockchain-/DLT-based CBDC would most likely be – in view of the costs alone – a more reasonable decision for the company, and would hence be even less costly than the cash alternative.¹⁶³ The point here is not claim that CBDC are always the more reasonable way of making payments; rather, it should be highlighted that the characteristics of cash as well as the advantages and drawbacks of this means of payments depends on the context one looks at. As a consequence, it is doubtful whether the involvement on intermediaries and the existence of ‘additional’ costs is a useful criterion for the present purposes.

3. Privacy of payments

Whether anonymity can or should be guaranteed by CBDC designs has been analysed from different angles, often times with the express concern that the new form of money might be used for illicit purposes (especially money laundering and terrorist financing).¹⁶⁴ As many people are concerned about their privacy, this is not merely a technical or legal question but also one of fundamental importance for the general public’s practical acceptance of a potential CBDC. Nevertheless, both the Fed and the ECB have made clear that ‘full’ anonymity is not an option.¹⁶⁵ In this light, the equivalence of CBDC and cash is questioned already at the outset. Indeed, the ability to make anonymous payments is generally closely linked to cash. However, is anonymity¹⁶⁶ an inherent feature of cash payments? In fact, there is nothing stopping lawmakers from requiring every cash payment to be recorded and every payer’s identity to be verified.¹⁶⁷ After all, there is nothing that would prevent lawmakers from granting completely anonymous access to commercial bank money too. It seems relatively clear that neither of these two options would be desirable, but this is not the point. What is crucial from the legal point of view is that anonymity is not an inherent feature of neither cash nor commercial bank money (nor tokens recorded in a decentralised ledger)¹⁶⁸ but rather a policy choice.¹⁶⁹ This is demonstrated by laws that require notification of cash payments upwards a certain threshold.¹⁷⁰ The law might even – quite contrary to the legal tender status – provide for an outright ban on cash payments of a certain size,¹⁷¹ legislation of the kind that has been proposed by the European Commission.¹⁷² Hence, anonymity is, again, a matter of perspective; the fact that the law might require a cash payer to verify her identity and record the transaction or even forbid certain transactions does not cause the banknotes or coins transferred to cease being banknotes or coins. What much ‘anonymity’ discussion seems to refers to is instead the user’s direct control of the tokens. This used to be an inherent feature of physical tokens but can nowadays, as explained, be replicated by technology for digital tokens.¹⁷³ There is, conversely, nothing inherent to cash payments that would require them to be legally anonymous. Thus, while anonymity is a very important aspect for the implementation of CBDC, it is – for the purposes of the present appraisal – not an inherent feature of banknotes or coins. What is more, technical ways of implementation that allow for anonymity are actively considered, as so-called ‘anonymity vouchers’ would potentially provide a certain level of anonymity for low-value payments.¹⁷⁴ Depending on the specific implementation, this might lead to a situation similar to cash, where some transactions are, from a legal perspective, ‘fully’ anonymous and some transactions – usually those of a certain size – that are not. In conclusion, the issue of anonymity does not, as such, rule out digital forms of banknotes or coins.

4. Issuance, acceptance and legal tender status

Point a) – issuance subject to the authorisation of the ECB – and f) – acceptance by all government entities – referenced above might surprise at first glance. This is because they seem to describe legal consequences of the fact that something ‘digital’ qualifies as a ‘banknote’ rather than exploring the concept of ‘banknote’ itself. A conceptually similar line of argument also refers to the status of cash as legal tender: declaring CBDC ‘banknotes’ would ‘automatically’ lead to their status as legal tender;¹⁷⁵ as a consequence, due to the legal tender’s ability to discharge of debts,¹⁷⁶ creditors of a monetary debt would be obliged to accept CBDC which, in turn, would put on them ‘the obligation to use electronic technology’.¹⁷⁷ Arguments of this kind should not be dismissed merely because that there is no clear distinction between definition (‘banknote’, ‘coin’) and legal consequence (legal tender status) since it seems hardly possible to fully separate the concept of these forms of money from their legal tender status. Rather, the legal tender status was conferred upon cash with the traditional concept of banknotes and coins – a physical piece of paper, metal or similar material – in mind, i.e. something that can in principle be transferred without any technical equipment or expertise. This calls the legality of digital cash into question. However, it could still be argued that digital banknotes and coins are compatible with the notion of legal tender. This is because the notion of legal tender is not absolute.¹⁷⁸ In the present context, this refers to the question under what circumstances a creditor may refuse cash even absent a contractual agreement on a non-cash payment. The private laws of the Member States might very well come to the conclusion that a creditor of a monetary debt may – despite a potential digital banknote’s or coin’s legal tender status – refuse payment in digital legal tender tokens under circumstances in which the opposite would be considered as unacceptable.¹⁷⁹ This might be found as long as payments in CBDC are not widespread and the implementation costs for using CBDC are high. Thus, the legal tender status of a CBDC does not necessarily imply the general ‘obligation to use electronic technology’. Yet, the Member States’ laws will likely – at least in questions of detail – differ on this matter.¹⁸⁰

Hence, while digital banknotes are, in principle, compatible with the TFEU’s notion of ‘banknotes’, the complications introduced by their ‘automatic’ legal tender status casts some doubts on whether Art. 128 TFEU supports the introduction of a digital ‘banknote’.¹⁸¹ At the very least, there exists some legal uncertainty that is not conducive to a smooth introduction of a digital euro. A solution for this problem might lie in the introduction of a digital banknote while at the same time further specifying its legal tender status in an act of secondary law,¹⁸² thereby addressing concerns associated with ‘the obligation to use electronic technology’. This act could, for instance, provide for a general obligation to accept the CBDC only when the necessary equipment is readily available.¹⁸³ Governments of the euro zone Member States should, in contrast, generally be obliged to accept payments (e.g. based on tax law) and provide the necessary infrastructure for this purpose. Indeed, the Commission has proposed legislation that, among other topics, further specifies and limits the obligation to accept a potential digital euro.¹⁸⁴ Additionally, further rules would be necessary with regard to denomination, specification and related issues.¹⁸⁵

5. Distinguishing ‘coins’ and ‘banknotes’

Having established that digital forms of cash can be – depending on the technical implementation – functionally equivalent to physical forms of cash, the question remains how to distinguish between the latter. In other words, would a CBDC be a digital ‘banknote’ or a digital ‘coin’? This issue especially pressing for EU law, as Art. 128 TFEU clearly distinguishes between these two forms of central bank money.¹⁸⁶ However, both banknotes and coins are based on physical tokens and both have a constant face value.¹⁸⁷ One obvious, albeit merely formal, distinction refers to the denomination of banknotes and coins.¹⁸⁸ Yet, the denomination is based on secondary law¹⁸⁹ and it is questionable whether one can use these instruments to interpret primary law.¹⁹⁰ What is more, this would mean that Art. 128 TFEU contains a flexible concept of banknotes and coins that can be changed at any time, there ‘delegating’ the task of defining banknotes and coins to secondary law. It is doubtful whether this is really the case.

Rather, Art. 128 TFEU should be understood as mirroring the historical development of money: among the first types of money were coins made of precious metals; later, paper money was introduced.¹⁹¹ Both forms of money rely on physical tokens and can have varying denominations, but the crucial difference is that coins consist of tokens that have intrinsic value:¹⁹² the metal that coins are made of possesses value in and of itself, simply because the copper, steel and so on can – in principle¹⁹³ – be used for different purposes regardless of whether it is also minted to become a form of money.¹⁹⁴ In contrast, the pieces of paper that are imprinted to become banknotes do not, practically, have any value if they had not been declared banknotes. Thus, Art. 128 TFEU can be read to functionally distinguish two forms of money that are both embodied in physical tokens: One form of money that consists in tokens with intrinsic value and another form of money that consists in tokens that lack said value; the latter are called banknotes, the former coins.¹⁹⁵ In application of this reading, neither printing ‘paper coins’ nor minting ‘golden banknotes’¹⁹⁶ would be compatible with Art. 128 TFEU. At the same time, datasets, tokens etc that would be used for ‘digital cash’ lack intrinsic value;¹⁹⁷ this also applies to crypto-assets like Bitcoin.¹⁹⁸ These thoughts lead to the conclusion that CBDC tokens (that likewise lack intrinsic value) would constitute, from a legal perspective, banknotes rather than coins.¹⁹⁹

F. Conclusions

This paper has shown that the discussion on the introduction CBDC is often based on unclear notions of account-based and token-based models and that the different technical options of implementation can blur the lines of established forms of money; this, in turn, complicates the legal assessment. The paper proposes direct control of the CBDC holder as a meaningful criterion to distinguish between account-based and token-based CBDC and compare them to incumbent forms of money.

Whether central banks have the power introduce CBDC as a new form of central bank money depends on the interpretation of the respective legal framework. While there appear to be good arguments that the introduction of a U.S. CBDC is covered by the ‘Coinage Clause’, additional legislation is required to authorise the Fed to offer to for the general public. With regard to account-based CBDC, the situation is similar from the perspective of the TFEU: while details are unclear, conferring legal tender status to this form of CBDC would at least require the adoption of a new act of secondary law.

With respect to token-based CBDC, the discussion in the EU is complicated by the question whether a CBDC could be regarded as ‘banknotes’ or ‘coins’ within the meaning of Art. 128 TFEU. The present research has shown that Art. 128 does not necessarily require a ‘banknote’ or ‘coin’ to be a physical token; given that digital tokens would have no intrinsic value, one would have to consider CBDC tokens – if implemented accordingly²⁰⁰ – as banknotes in the legal sense. This would imply, on the one hand, that the ECB has wide discretion with regard to the introduction of this form of money²⁰¹ and, on the other hand, that CBDC tokens of this kind would be considered as legal tender within the meaning of Art. 128(1) TFEU.²⁰² However, it is submitted that the ‘automatic’ legal tender status of ‘CBDC banknotes’ raises doubts whether Art. 128 TFEU supports the introduction of a digital ‘banknote’, so that corresponding legislation should be introduced – if a token-based model is chosen for implementation – to ensure a smooth adoption of a digital euro.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This research is connected to the project ‘Rechtsrahmen für Central Bank Digital Currencies in Österreich’ (Legal framework for Central Bank Digital Currencies in Austria) which is funded by the Austrian National Bank’s (OeNB) Jubiläumsfonds. A preliminary version of the article was published at https://law.stanford.edu/publications/no-95-cash-accounts-and-central-bank-digital-currencies-a-transatlantic-view-on-the-digitization-of-retail-central-bank-money/.

Notes

1 Whether crypto-assets can be considered as ‘money’ in the economic sense should be distinguished from the question whether they can be qualified as ‘money’ in the legal sense; see on this issue E.II. below. When not referring to legal norms or the concept of legal tender, this paper takes a broad approach to the term, also including to crypto-assets like bitcoin.

2 See, e.g. ECB, ‘Virtual Currency Schemes’ (2012) 21–7, <https://op.europa.eu/en/publication-detail/-/publication/71c215f0-8624-46ab-8f47-23c965f8253d/language-en/format-PDF/source-276521781> accessed 2 December 2022; ECB, ‘Virtual Currency Schemes – a further analysis’ (2015) 14–29 <https://op.europa.eu/en/publication-detail/-/publication/96fe84e9-3d29-4790-a1a4-d89218c244ac/language-en> accessed 2 December 2022; ECB Crypto-Asset Task Force, ‘Crypto-Assets: Implications for financial stability, monetary policy, and payments and market infrastructures’ (Occasional Paper Series No 223, 2019) 7–28 <https://www.ecb.europa.eu/pub/pdf/scpops/ecb.op223~3ce14e986c.en.pdf>, accessed 2 December 2022; Bank of England, ‘Central Bank Digital Currency’ (2020) 7–8 <https://www.bankofengland.co.uk/-/media/boe/files/paper/2020/central-bank-digital-currency-opportunities-challenges-and-design.pdf>, accessed 2 December 2022; Board of Governors of the Federal Reserve System, ‘Financial Stability Report’ (2022) 45–6 <https://www.federalreserve.gov/publications/financial-stability-report.htm> accessed 2 December 2022; see also, e.g. D Yermack, ‘Is Bitcoin a Real Currency? An Economic Appraisal’ in D Lee and K Chuen (eds), Handbook of Digital Currency: Bitcoin, Innovation, Financial Instruments, and Big Data, (Elsevier 2015) 31; S Ammous, ‘Can cryptocurrencies fulfil the functions of money?’ (2018) 70 The Quarterly Rev. of Econ. and Fin. 38; S Dow, ‘Monetary Reform, Central Banks, and Digital Currencies’ (2019) 48 Int’l J. of Political Econ. 153.

3 <https://www.diem.com/en-us/updates/stuart-levey-statement-diem-asset-sale/> accessed 2 December 2022.

4 See, e.g. ECB, ‘Report on a Digital Euro’ (2020) <https://www.ecb.europa.eu/pub/pdf/other/Report_on_a_digital_euro~4d7268b458.en.pdf> accessed 2 December 2022; Board of Governors of the Federal Reserve System, ‘Money and Payments: The U.S. Dollar in the Age of Digital Transformation’ (2022) <https://www.federalreserve.gov/publications/money-and-payments-discussion-paper.htm> accessed 2 December 2022; for an overview of several initiatives see Auer and others, ‘Rise of the central bank digital currencies: drivers, approaches and technologies’ (2020) BIS Working Papers No 880; see also <https://www.atlanticcouncil.org/cbdctracker/> accessed 21 April 2023.

5 As there are already central bank (wholesale) accounts, digital central bank money technically already exists, cf. P Athanassiou, Digital Innovation in Financial Services (Kluwer Law International 2018) 186; U Bindseil, ‘Central Bank Digital Currency: Financial System Implications and Control’ (2019) 48 Int’l J. of Political Econ. 303, 304; W Bossu and others, ‘Legal Aspects of Central Bank Digital Currency: Central Bank und Monetary Law Considerations’ (2020) IMF Working Paper WP/20/254 9, 41; H Nabilou and A Prüm, ‘Central Banks and Regulation of Cryptocurrencies’ (2019-2020) Rev. of Banking & Fin. L. 1003, 1088–9.

6 ECB (n 4) 6.

7 ibid. 36 et seq.

8 ECB, ‘Progress on the investigation phase of a digital euro’ (2022) 2 <https://www.ecb.europa.eu/paym/digital_euro/investigation/governance/shared/files/ecb.degov220929.en.pdf> accessed 2 December 2022 (‘A digital euro would be an electronic means of payment for retail payments, issued by the central bank and accessible to everyone in the euro area’); see also ECB, ‘The case for a digital euro: key objectives and design considerations’ (2022) 1 <https://www.ecb.europa.eu/pub/pdf/other/key_objectives_digital_euro~f11592d6fb.en.pdf> accessed 2 December 2022.

9 ECB, Progress on the investigation phase (n 8) 2, 8, 10; ECB, ‘Progress on the investigation phase of a digital euro – second report’ (2022) <https://www.ecb.europa.eu/paym/digital_euro/investigation/governance/shared/files/ecb.degov221221_Progress.en.pdf> accessed 2 December 2022. See also F Panetta, ‘Building on our strengths: the role of the public and private sectors in the digital euro ecosystem’ (speech given at 29 September 2022) <https://www.ecb.europa.eu/press/key/date/2022/html/ecb.sp220929~91a3775a2a.en.html> accessed 2 December 2022 (‘The intermediaries that would distribute the digital euro have in-depth knowledge and unique insights into what users need. They are thus best placed to be the direct counterparts for the individuals, merchants and businesses that would use the digital euro. These intermediaries would open accounts and wallets. They would conduct know your customer and anti-money laundering checks. And they would provide the devices or technology needed to pay in physical stores, online or person to person’).

10 ECB, Progress on the investigation phase (n 8) 5.

11 ibid. 6.

12 ibid. 10; Panetta (n 9).

13 ECB, Progress on the investigation phase (n 8) 10.

14 ECB, ‘Progress on the investigation phase of a digital euro – third report’ (2023) <https://www.ecb.europa.eu/paym/digital_euro/investigation/governance/shared/files/ecb.degov230424_progress.en.pdf> accessed 14 September 2023.

15 ECB, ‘Progress on the investigation phase of a digital euro – fourth report’ (2023) <https://www.ecb.europa.eu/paym/digital_euro/investigation/governance/shared/files/ecb.degov230713-fourth-progress-report-digital-euro-investigation-phase.en.pdf?704b0eee4c20eee4dbe4970f5091a96a> accessed 14 September 2023.

16 ECB, ‘Eurosystem proceeds to next phase of digital euro project’ (2023) <https://www.ecb.europa.eu/press/pr/date/2023/html/ecb.pr231018∼111a014ae7.en.html> accessed 22 January 2024.

17 European Commission, ‘A digital euro for the EU’ <https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/13392-A-digital-euro-for-the-EU_en> accessed December 2 2022.

18 European Commission, Digital euro package <https://finance.ec.europa.eu/publications/digital-euro-package_en> accessed September 14 2023.

19 Board of Governors of the Federal Reserve System (n 4).

20 ibid. 8 (referring to problems of financial inclusion and cross-border payments, however), 13.

21 ibid. 13.

22 ibid. 13.

23 ibid. 21.

24 Office of Science and Technology Policy, Technical Evaluation for a U.S. Central Bank Digital Currency System (2022) <https://www.whitehouse.gov/wp-content/uploads/2022/09/09-2022-Technical-Evaluation-US-CBDC-System.pdf> accessed 2 December 2022.

25 U.S. Department of the Treasury, Future of Money and Payments (2022) <https://home.treasury.gov/system/files/136/Future-of-Money-and-Payments.pdf> accessed 2 December 2022. See for the background Exec. Order No. 14067, 87 Fed. Reg. 14143 (9 March 2022).

26 Cf. Athanassiou (n 5) 185; see also ECB (n 4) 6 (‘In this report, the term digital euro denotes a liability of the Eurosystem recorded in digital form as a complement to cash and central bank deposits’).

27 BIS, ‘Central bank digital currencies: foundational principles and core features’ (2020) 3 <https://www.bis.org/publ/othp33.htm> accessed 2 December 2022; U.S. Department of the Treasury (n 25) 4-5.

28 Bossu and others (n 5) 12-13; see also ECB (n 4) 25.

29 BIS, ‘Central bank digital currencies’ (2018) <https://www.bis.org/cpmi/publ/d174.htm> accessed 2 December 2022; see also R Auer and R Böhme, ‘The technology of retail central bank digital currency’ (2020) BIS Quarterly Review 85, 88; Bossu and others (n 5) 11.

30 See also Athanassiou (n 5) 209 (focusing on the finality of payments and the central banks’ corresponding liability risks).

31 ECB (n 4) 29-30; see also ibid. at 29 note 52 (highlighting that a ‘bearer digital euro’ would not necessarily have to be based on a DLT).

32 Nabilou and Prüm (n 5) 1090.

33 IHY Chiu, ‘Building out the crypto economy in Europe: a proposal for central bank digital euros’ (2021) 46 E.L. Rev. 435, 449.

34 RM Lastra and JG Allen, ‘Virtual currencies in the Eurosystem: challenges ahead’ (2018) 42 <https://www.europarl.europa.eu/thinktank/en/document/IPOL_STU(2018)619020> accessed 2 December 2022; see also Athanassiou (n 5) 187.

35 Banque de France, ‘Central Bank Digital Currency’ (2020) 21 (‘In token form, where digital currency units are linked to a physical medium, which may be, but does not have to be, dedicated (e.g. mobile phone, hard drive or payment card), and which characterises ownership’) <https://publications.banque-france.fr/sites/default/files/media/2020/02/04/central-bank-digital-currency_cbdc_2020_02_03.pdf>, accessed 2 December 2022. However, physical devices can also be used in account-based systems to initiate payments, for instance.

36 Bindseil (n 5) 304; cf. also AM Mooij, ‘A digital euro for everyone: Can the European System of Central Banks introduce general purpose CBDC as part of its economic mandate?’ (2023) 24 J. Banking Reg. 89, 91.

37 U.S. Department of the Treasury (n 25) 22–3 (underlining new AML/CFT obligations for the central bank).

38 U.S. Department of the Treasury (n 25) 23. The ECB has recently reinforced that it endorses a model involving intermediaries, see ECB (n 8) 3 (referring to ‘supervised intermediaries’); see already part B above.

39 Bossu and others (n 5) 10.

40 BIS (n 27) 4 (describing this model as a form of ‘narrow-bank’ money).

41 Cf., e.g. Bindseil (n 5) 304; B Geva, SN Grünewald and C Zellweger-Gutknecht, ‘The e-Banknote as a ‘Banknote’: A Monetary Law Interpreted’ (2021) 41 Oxford J. Legal Stud. 1119, 1123 et seq., 1134 et seq.; U.S. Department of the Treasury (n 25) 22–3; ECB (n 4) 12; RC Hockett, ‘The Capital Commons: Digital Money and Citizens' Finance in a Productive Commercial Republic’ (2019) 39 Rev. Banking & Fin. L., 345, 484.

42 J Crawford, L Menand and M Ricks, ‘FedAccounts: Digital Dollars’ (2021) 89 Geo. Wash. L. Rev. 113, 151 (also referring to the Bitcoin-network).

43 ibid. 152.

44 ibid. 152–3.

45 ibid. 151.

46 See also on this question E.4. below.

47 Cf. also recital 13 Regulation (EU) 2018/1672 of the European Parliament and of the Council of 23 October 2018 on controls on cash entering or leaving the Union and repealing Regulation (EC) No 1889/2005 [2018] OJ L 284/6 (‘One of the key concepts used in this Regulation is that of ‘cash’, which should be defined as comprising four categories: currency, bearer-negotiable instruments, commodities used as highly-liquid stores of value and certain types of prepaid cards’); see also ibid. Art. 2(1)(a).

48 Cf. Office of Science and Technology Policy (n 24) 13 (‘P2P design with a bearer-asset type token could enable transactions without any intermediary […]’). It should be noted, however, that control over the CBDC tokens might nevertheless be intermediated if this control can only be exercised via the services of an intermediary; thus, at least from a conceptual point of view, also two-tier or ‘hybrid’ architectures are not incompatible with the notion of token-based CBDC.

49 Cf. JAT Fairfield, ‘Bitproperty’ (2015) 88 S. Cal. L. Rev., 805, 839 (describing the physicality of assets as a mere proxy for rivalrousness); Geva and others (n 41) 1130 et seq.

50 Cf. also Geva and others (n 41) 1125–6.

51 Cf. ECB (n 4) 40 (‘A decentralised infrastructure could allow end users to transfer holdings of the bearer digital euro among them with no need to mandate a third party to play any role in the transaction. This approach could be implemented in two ways: either via distributed ledger technology (DLT) protocols or by means of local storage (e.g. using prepaid cards and mobile phone functionality, including in offline payments)’). It should be mentioned, that there are also ‘permissioned’ blockchain-/DLT infrastructures that are not publicly accessible or feature limited access, depending on the decision of a certain institution (e.g. a central bank). Hence, such infrastructures typically feature a limited degree of decentralisation.

52 See on the notion of ‘control’ also UK Law Commission, ‘Digital Assets – Consultation paper’ (2022), 219 et seq., <https://s3-eu-west-2.amazonaws.com/lawcom-prod-storage-11jsxou24uy7q/uploads/2022/07/Digital-Assets-Consultation-Paper-Law-Commission-1.pdf>, accessed 9 September 2023. Due to the user’s direct control (that does not depend on the involvement of an intermediary), it is questionable – for the tokens referred to in this section – whether one can meaningfully distinguish between ‘possession’ regarding physical tokens and ‘knowledge’ regarding digital tokens; see, however, Bossu and others (n 5) 11 (also mentioning that holders of CBDC accounts or money held in accounts would have to identify in order to access the funds: ‘I am therefore I own’); see also Auer and Böhme (n 29) 92 (distinguishing between ‘identification’ for CBDC accounts and ‘knowledge’ for token-based CBDC), 93 et seq. In practice, verification of the user’s identity will often depend on the user’s knowledge of certain pieces of information, such as passwords or log-in credentials; at the same time, it does not appear to be inconceivable that a blockchain/DLT solution relies on pieces of information other than a ‘classic’ private key (e.g. fingerprints) to initiate transactions.

53 It deserves mention that the ECB currently does not actively explore transfer mechanisms with P2P validation of online payments (ECB, Progress on the investigation phase of a digital euro (n 8) 5-6); this seems to apply to transfer mechanisms that are currently known from networks like Bitcoin, for instance.

54 Cf. also KFK Low and EGS Teo, ‘Bitcoins and other cryptocurrencies as property?’ (2017) 9 Law, Innovation and Technology 235, 245 et seq. (on Bitcoin).

55 I have made this point before, see M Miernicki, Kryptowerte im Privatrecht (Manz 2023) 201 ff, 285 ff, 787 ff.

56 Cf. also U.S. Department of the Treasury (n 25) 24 (mentioning digital wallets); in principle, however, consumers could also use what might be called digital wallets to manage their funds in account-based CBDC.

57 On the question of the legal position of the CBDC holder see below D.IV.

58 Cf. Bossu and others (n 5) 12–3 (distinguishing cash current accounts and ledger accounts; however, also stating that ‘token-based CBDC can be represented in centrally managed ledger accounts’); see also Chiu (n 33) 449 (describing an ‘account-based’ design where CBDC is ‘transferred out of the account to fund a dApp developer, who issues tokens in return, which may be kept at the same account’).

59 See also Bindseil (n 5) 304 (‘Alternatively, the central bank could offer a digital token currency that would circulate in a decentralized way without central ledger’) (emphasis omitted); however, decentralisation in the present context refers to the way the ledger is managed, and not only to the fact that transaction can be initiated without the involvement of an intermediary.

60 Cf. ECB (n 4) 30 (focusing on technical means – like fingerprints or iris recognition – to ensure that only legally entitled users participate in a transaction).

61 This is already expressed in the ‘Bitcoin-Whitepaper’, see S Nakamoto, Bitcoin: ‘A Peer-to-Peer Electronic Cash System’ <https://bitcoin.org/bitcoin.pdf> accessed December 2 2022.

62 P De Filippi and A Wright, Blockchain and the Law (Harvard University Press 2018) 18 et seq.

63 Fairfield (n 49) 817 et seq.

64 Cf. ECB (n 4) 30 (‘It is important to note that the absence of a central third party that can block a specific user or counterfeit digital euro units substantially increases the impact of potential hacking with potentially disruptive consequences for the economy, including the possible unwarranted expansion of the monetary base’); ECB (n 8) 7, 9; see also BIS (n 27) 12 (‘a centralised ledger could record only the total CBDC issued, with individual balances stored locally on a smartphone or card’); A Dumitrescu-Pasecinic, ‘“An offer they can't refuse”: reflections on the mandatory acceptance of a digital euro banknote’ (2021) 36 J.I.B.L.R., 249, 249–50.

65 Cf. Filippi and Wright (n 62) 18–9. Corresponding issues cannot arise in connection with cash because it lacks endless reproducibility; clearly, however, there is the risk of counterfeit notes. See also on possible models of implementation Geva and others (n 41) 1141 et seq.

66 Cf. Milam v U.S., 524 F.2d 629 (9th Cir. 1974); Juilliard v Greenman, 110 U.S. 421 (1884); J Langner, ‘ESCB/Eurosystem/National Central Banks in EU law of economic and Monetary Union’ in F Amtenbrink and C Herrmann (eds), The EU Law of Economic and Monetary Union (Oxford University Press 2020) 389, 399; see also Hockett (n 41) at 469.

67 Cf. Board of Governors of the Federal Reserve System (n 4) 13.

68 Cf. Bossu and others (n 5) 15.

69 Hockett (n 41) at 469.

70 Cf. Banque de France (n 35) 30.

71 Cf. Bossu and others (n 5) 14.

72 Cf. C Proctor, Mann and Proctor on the Law of Money, (8th edn, Oxford University Press 2022) 24, 31 et seq.; R Smits, The European Central Bank (Kluwer Law International 1997) 204 note 225.

73 See, e.g. JJ Chung, ‘Money as Simulacrum: The Legal Nature and Reality of Money’ (2009) 5 Hastings Bus. L. J., 109, 111 et seq.; Dow (n 2) 153. See for a detailed account Proctor (n 72) 7 et seq.

74 Cf. Bossu and others (n 5) 8.

75 UCC § 1-201(b)(24); according to this provisions, money ‘means a medium of exchange currently authorized or adopted by a domestic or foreign government. The term includes a monetary unit of account established by an intergovernmental organisation or by agreement between two or more countries’.

76 Pub. L. No. 95-630, 92 Stat. 3641; see especially 15 U.S.C. § 1693 et seq.

77 Directive (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015 on payment services in the internal market [2015] OJ L 337/35.

78 Directive 2009/110/EC of the European Parliament and of the Council of 16 September 2009 on the taking up, pursuit and prudential supervision of the business of electronic money institutions [2009] OJ L 267/7; according to Art. 2(2), electronic money ‘means electronically, including magnetically, stored monetary value as represented by a claim on the issuer which is issued on receipt of funds for the purpose of making payment transactions as defined in point 5 of Art. 4 of Directive 2007/64/EC, and which is accepted by a natural or legal person other than the electronic money issuer.’

79 Board of Governors of the Federal Reserve System (n 4) 25–6.

80 Cf. Bossu and others (n 5) 8, 12. See also J Cheng and J Torregrossa, ‘A Lawyer’s Perspective on U.S. Payment System Evolution and Money in the Digital Age’ (FEDS Notes, 2022) <https://www.federalreserve.gov/econres/notes/feds-notes/a-lawyers-perspective-on-us-payment-system-evolution-and-money-in-the-digital-age-20220204.html> accessed December 2 2022.

81 This does not necessarily mean that the holder of a banknote has a private law claim against the central bank; cf. on the legal nature of banknotes Geva and others (n 41) 1122-1123, 1128 et seq.; Proctor (n 72) 715-716; H Weenink, ‘The legal nature of Euro banknotes’ (2003) 18 J.I.B.L.R. 433, 437.

82 Bindseil (n 5) 303-304, 309–312 (also summarizing the historical development); Board of Governors of the Federal Reserve System (n 4) 13, 25; U.S. Department of the Treasury (n 25) 19; Nabilou and Prüm (n 5) 1096.

83 See E.II. and E.III. below.

84 It is reported that El Salvador has conferred legal tender status upon bitcoins, for instance; see, e.g. H Arslanian and others, ‘El Salvador’s law: a meaningful test for Bitcoin’ (2021) <https://www.pwc.com/gx/en/financial-services/pdf/el-salvadors-law-a-meaningful-test-for-bitcoin.pdf> accessed 2 December 2022.

85 Cf. B de Witte, ‘EMU as Constitutional Law’ in Amtenbrink and Herrmann (n 66) 278.

86 On the interpretation of the competences see, e.g. Case C-370/12 Pringle v Government of Ireland [2012] ECLI:EU:C:2012:756; Case C-62/14 Gauweiler v Deutscher Bundestag [2015] ECLI:EU:C:2015:400; Case C-493/17, Weiss [2018] ECLI:EU:C:2018:1000.

87 Joined Cases C-422/19 & C-423/19 Dietrich and Häring v Hessischer Rundfunk [2021] ECLI:EU:C:2021:63, para. 52 et seq.; de Witte (n 85) 283 et seq.; K Lenaerts, P Van Nuffel and T Corthaut, EU Constitutional Law (3rd edn, Oxford University Press 2021) 5–022 et seq.

88 Case C-493/17 Weiss, [50]. See also K Tuori, ‘Monetary Policy (Objectives and Instruments)’ in Amtenbrink and Herrmann (n 66) 618.

89 Case C-493/17 Weiss, [53].

90 Art 16 ESCB/ECB Statute contains similar language. On the legislative history of these provisions cf. Smits (n 72) 204-206.

91 See also Art. I, § 10 cl. 1.

92 Cf. Norman v Baltimore & O. R. Co., 294 U.S. 240, 302 et seq. (1935).

93 See, e.g. Chung (n 73) 130 et seq.; JW Hurst, A Legal History of Money in the United States, 1774–1970 (University of Nebraska Press 1973) 40; RG Natelson, ‘Paper Money and the Original Understanding of the Coinage Clause’ (2008) 31 Harv. J. L. & Pub. Pol’y 1017, 1019 note 3; CP Guzelian, ‘The Dollar’s Deadly Laws That Cause Poverty and Destroy the Environment’ (2019) 98 Neb. L. Rev. 56, 61 et seq.

94 Knox v Lee and Parker v Davis, 79 U.S. (12 Wall.) 457 (1871). See also Juilliard v Greenman, 110 U.S. 421, 448, 4 S. Ct. 122, 28 L. Ed. 204 (1884).

95 Cf., e.g. Foret v Wilson, 725 F.2d 254, 254–55 (5th Cir. 1984) (‘[The] argument, that only gold and silver coin may be constituted legal tender by the United States, is hopeless and frivolous, having been rejected finally by the United States Supreme Court one hundred years ago’).

96 See, e.g. JPM Callan, ‘Reexamining the Federal Monetary Powers’ (2011) 19 U. Miami Bus. L. Rev. 111; see also CP Guzelian, ‘Dollars that devalue are unconstitutional’ (2023) 54 St. Mary’s L. J. 85.

97 See on this issue, e.g. Natelson (n 93); see also A Khan, ‘The Evolution of Money: A Story of Constitutional Nullification’ (1999) 67 U. Cin. L. Rev. 393; JM Bickers, ‘Greenbacks, Consent, and Unwritten Amendments’ (2021) 73 Ark. L. Rev. 669.

98 Cf. 12 U.S.C. § 226.

99 Without legal tender status, a CBDC might not attract a sufficient number of users in practice, cf. ECB (n 4) 33; cf. also S Grünewald, C Zellweger-Gutknecht and B Geva, ‘Digital Euro and ECB Powers’ (2021) 58 CMLR 1029, 1052 et seq.; Hurst (n 93) 44 (‘Lawmakers might confer legal-tender status to make particular money more acceptable’). However, no definitive decision on this matter has been taken in the United States, cf. Board of Governors of the Federal Reserve System (n 4) 22.

100 See from an international perspective Bossu and others (n 5) 31; see also Chung (n 73) 113–4; R Freitag, ‘Euro as Legal Tender (and Banknotes)’ in Amtenbrink and Herrmann (n 66) 595, 596; Proctor (n 72) 77 et seq.; Weenink (n 81) 437.

101 Cf. G Nebolsine, ‘The Gold Clause in Private Contracts’ (1933) 42 Yale. L. J. 1051, 1052–3; (‘Legal tender may be defined as money which cannot lawfully be refused by a creditor’, references omitted).

102 Cf., e.g. Switzerland’s Federal Act on Currency and Payment Instruments of 22 December 1999 (AS 2000 1144) Art 2(c) (conferring legal tender status to Swiss franc sight deposits at the Swiss National Bank).

103 Bossu and others (n 5) 39.

104 Cf. Hurst (n 93) 40.

105 Bossu and others (n 5) 31–2.

106 Guzelian (n 93) 70.

107 Clearly, the concept of legal tender implies an array of further issues that are beyond the scope of this paper. Reference can be made, e.g. to the question whether legal tender may be used to settle debts expressed in foreign currency, see Freitag (n 100) 597–8.

108 Cf. Board of Governors of the Federal Reserve System (n 4) 25.

109 31 U.S.C. § 5103; see also 12 U.S.C. § 411 (Art. 16 of the Federal Reserve Act).

110 Council Regulation (EC) No 974/98 of 3 May 1998 on the introduction of the euro [1998] OJ L 139/1. Art. 10 reaffirms the legal tender status of banknotes.

111 Cf. Dietrich and Häring (n 87) para. 47; Weenink (n 81) 433 note 14.

112 S Loosveld, ‘The 5th Anti-Money Laundering Directive: virtual currencies and other novelties’ (2018) 33 J.I.B.L.R. 297, 301–2.

113 Smits (n 72) 207–8.

114 ibid.; Weenink (n 81) 438.

115 See also Chung (n 73) 113–4.

116 Freitag (n 100) 610.

117 Commission Recommendation of 22 March 2010 on the scope and effects of legal tender of euro banknotes and coins (2010/191/EU) [2010] OJ L 83/70-71.

118 ibid. at point 1.

119 Dietrich and Häring (n 87).

120 ibid. para. 46.

121 The dispute in the main proceeding revolved around the prohibition by a Member State to pay radio and television license fees based on national law in cash, see ibid. para. 15 et seq.; on payment obligations stemming from private law see ibid. at 56.

122 U.S. Department of Treasury, FAQs <https://www.bep.gov/currency/faqs> accessed 2 December 2022; see also Board of Governors of the Federal Reserve System (n 4) 25 note 35 (‘This statute means that these forms of U.S. money are a valid and legal offer of payment for debts when tendered to a creditor. Even still, consumers and businesses may agree to use other methods of payment unless there is a state or local law that says otherwise'). See, however, Guzelian (n 93) 58–59 (‘First are legal tender laws. These laws require any creditor to accept payment in a fiat currency from the debtor, even if the original contract called for payment of equivalent value in some other form of currency or exchange’).

123 Failure to comply with a contractual obligation might ultimately still lead to a monetary claim (especially for damages).

124 The law might also provide for express rules that cash payments must not be declined. As for the U.S., it has been reported that some municipalities, for instance, have prohibited certain businesses from refusing cash, see Bossu and others (n 5) 33 note 78.

125 Joined Cases C-422/19 & C-423/19, Dietrich and Häring vs Hessischer Rundfunk, Opinion of AG Pitruzzella 124–125 (‘[I]t is clear from the foregoing that, as EU law currently stands, the concept of legal tender as regards banknotes and coins must be understood as entailing an obligation in principle for the creditor of a payment obligation to accept banknotes and coins, unless the contracting parties exercise their contractual freedom to agree on other means of payment, or unless the legislation adopted by the Union or by a Member State in exercising their respective competences […]’) (emphasis added); see also Loosveld (n 112) 302; M Miernicki, ‘‘Recht auf Barzahlung’ – Zum Verbot der Begleichung von Rundfunkgebühren mit gesetzlichen Zahlungsmitteln’ (2021) Zeitschrift für Finanzmarktrecht 229, 230.

126 ECB, ‘FAQ on cash’ <https://www.ecb.europa.eu/euro/cash_strategy/html/cash-faq.en.html> accessed December 2 2022 (‘The retailer must provide a legitimate excuse, such as a difficulty maintaining sufficient cash reserves to provide change or concrete physical security risks due to the presence of large amounts of cash’).

127 See E.IV.4. below.

128 See, however, ECB (n. 134) (‘Displaying a label or posters indicating that the retailer refuses payments in cash, or payments made in certain banknote denominations, is not enough’). Cf. also Art. 10 COM(2023) 369 final (prohibiting the ‘unilateral exclusion’ of digital euro payments; this slightly misleading expression means that, inter alia, a contractual (bilateral) agreement to exclude such payments must be ‘individually negotiated’).

129 Cf. also R Freitag in M Artz and others (eds), BeckOGK BGB § 244 [33] (updated 1 April 2020).

130 Dietrich and Häring (n 87) para. 55 et seq. See also Recital 19 Council Regulation (EC) No 974/98 of 3 May 1998 on the introduction of the euro [1998] OJ L 139/1 (‘[…] whereas limitations on payments in notes and coins, established by Member States for public reasons, are not incompatible with the status of legal tender of euro banknotes and coins, provided that other lawful means for the settlement of monetary debts are available’); H Siekmann, ‘Monetary Aspects of the Euro as Single European Currency – a German Perspective’ in R Freitag and S Omlor (eds), The Euro as legal tender (De Gruyter 2020) 1, 43 et seq.

131 Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, [2006] OJ L 347/1; Art. 135 contains an exemption for ‘transactions, including negotiation, concerning currency, bank notes and coins used as legal tender, with the exception of collectors' items, that is to say, gold, silver or other metal coins or bank notes which are not normally used as legal tender or coins of numismatic interest’.

132 Case C-264/14, Skatteverket v Hedqvist [2015] ECLI:EU:C:2015:718, [52].

133 Atwal v Nortonlifelock, Inc., 2022 U.S. Dist. LEXIS 19974 (United States District Court for the Western District of New York); LJ Trautman and AC Harrell, ‘Bitcoin Versus Regulated Payment Systems: What Gives?’ (2017) 38 Cardozo L. Rev. 1041, 1051 et seq.

134 See, e.g. M Gronwald, ‘Is Bitcoin a Commodity? On price jumps, demand shocks, and certainty of supply’ (2019) 97 Journal of International Money and Finance 86.

135 These accounts are often referred to as ‘master accounts’, see Cheng and Torregrossa (n 80).

136 12 U.S.C. § 342; see for an overview of further eligible entities, e.g. Crawford and others (n 42) 116; Hockett (n 41) at 404, 409–10.

137 Board of Governors of the Federal Reserve System (n 4) 13.

138 Crawford and others (n 42) 171.

139 In this connection, one would also have to ask what kind of assets could be offered by consumers as collateral within the meaning of Art. 17 ESCB/ECB Statute (see also Art. 18).

140 Dumitrescu-Pasecinic (n 64) 251. See also Banque de France (n 35) 31; Mooij (n 37) 94 et seq.

141 H Weenink in H von der Groeben, J Schwarze and A Hatje (eds), Europäisches Unionsrecht (7th edn Nomos 2015), Artikel 17 Satzung ESZB/EZB [2] (also arguing that the term ‘other market participants’ can be construed in accordance with Art. 22 ESCB/ECB Statute on clearing and payment systems, as well as the ECB’s Guideline ECB/2012/27 [2013] L 30/1, see id. at 8). ECB guidelines are binding instruments, M Ioannidis, ‘The European Central Bank’ in Amtenbrink and Herrmann (n 66) 353, 386.

142 ECB (n 4) 25.

143 ibid.

144 See, however, Mooij (n 36) 95 et seq. (arguing that the introduction of account-based retail CBDC is not compatible with the ECB’s economic mandate).

145 See, e.g. G7, ‘Public Policy Principles for Retail Central Bank Digital Currencies (CBDCs)’ (2021) 22 <https://www.mof.go.jp/english/policy/international_policy/convention/g7/g7_20211013_2.pdf> accessed 2 December 2022; see also BIS (n 27) 12-15; Panetta (n 9) (‘We can design the digital euro to ensure that the Eurosystem only processes data to settle transactions with no possibility to track payments sent or received by any specific user. Strict segregation of data between intermediaries and the Eurosystem, as well as privacy-enhancing techniques, would ensure that the Eurosystem cannot link any visible data to the identity of a digital euro user’).

146 In any event, account-based CBDC require the existence of a direct liability of a central bank as a basic requirement for central bank money, Bossu and others (n 5) 10. It is doubtful whether one could speak of a central bank account if there is, through the involvement of intermediaries, an insolvency risk for the account holder; see Section C. above.

147 Cf. also Geva and others (n 41) at 1134–5; Mooij (n 36) 103–4.

148 Cf. Proctor (n 72) 24, 31 et seq.

149 Juilliard (110 U.S. 421) 464–5 (Justice Field, dissenting). See on the opinion Callan (n 96) 134–5.

150 Juilliard (110 U.S. 421) 462–3 (Justice Field, dissenting) (‘Money is not only a medium of exchange, but it is a standard of value. Nothing can be such standard which has not intrinsic value, or which, is subject to frequent changes in value’). See also on the issue of intrinsic value Guzelian (n 96) 114 et seq.

151 It should be noted that this provision regulates the powers of the ECB while U.S. constitution referred to before regulates the powers of Congress; however, Art. 128 TFEU, among others, is understood to further specify the exclusive competence of the Union in monetary policy according to Art. 3(1)(c) TFEU, see Joined Cases C-422/19 & C-423/19 Dietrich and Häring, [33 et seq.].

152 Also the U.S. Constitution uses the term to ‘coin’ money; see on the possible historic meaning of term Natelson (n 93) 1026 et seq., 1061 et seq.

153 Cf. also Bossu and others (n 5) 19.

154 Cf., e.g. Siekmann (n 130) 49 (‘The terms ‘banknote’ and ‘coin’ have been established for centuries and possess a clear meaning. Subsuming any kind of electronic instrument would be at its core an act of legislation and not of applying the law’); see also Athanassiou (n 5) 204–5; from international perspective Bossu and others (n 5) 16, 20. Cf. also Nabilou and Prüm (n 5) 1086.

155 Grünewald and others (n 99) 1032 et seq. (referring to the provision’s wording, the drafting history as well as systematic and teleological considerations); Lastra and Allen (n 34) 44–5 (‘The issue of currency in the Eurozone is regulated by [Art. 128 TFEU], which provides that the ECB has the exclusive right to issue euro banknotes. In our view, this would include ‘e-euro’ VC tokens’); see also, e.g. Chiu (n 33) 452; Geva and others (n 41) 1127 et seq. See in general on the interpretation of EU monetary law F Elderson, ‘Legal Interpretation within the ESCB: Is there Method in It?’ in ECB (ed), Legal Aspects of the European System of Central Banks: Liber Amicorum for Paolo Zamboni Garavelli (ECB 2005) 93.

156 ECB, Report on a Digital Euro (n 5) 24. See also ECB (n 15) 4 (‘A digital euro be a public good, reflecting the natural evolution of cash in the digital sphere’).

157 Siekmann (n 130) 49; see also Grünewald and others (n 99), 1036 (‘In other words, to be covered by Article 128(1) TFEU and Article 16 ESCB Statute, digital banknotes must be designed as a functional equivalent to tangible banknotes’, footnotes omitted).

158 Siekmann (n 130) 50. See also Dumitrescu-Pasecinic (n 64) 252–3.

159 See Section D above.

160 A Pinna and W Ruttenberg, ‘Distributed ledger technologies in securities post-trading’ (2016) ECB Occasional Paper Series No 172 <https://www.ecb.europa.eu/pub/pdf/scpops/ecbop172.en.pdf> accessed 2 December 2022 (‘An UTXO may be seen as the digital representation of a banknote’).

161 This should not be confused with the psychological conceptions that humans might want to ‘see and feel the currency’, cf. Smits (n 72) 204. It is doubtful whether this line of argumentation also applies if the CBDC tokens can only be accessed by relying on the services of an intermediary, as the concept of banknotes implies that holders can exercise direct control. Thus, tokens that are necessarily ‘deposited’ with an intermediary (in this regard, like securities deposited with a bank or central securities depositories) would arguably not qualify as banknotes even if unintermediated control would be possibly from a technical standpoint. Cf. on different issuance and redemption options for ‘e-banknotes’ Geva and others (n 41) 1145 et seq.

162 The contractual obligation to pay in Paris is assumed here.

163 Cf. Athanassiou (n 5) 185. It should also be noted that storing a large amounts of cash in one’s home involves costs and risks; in this light, a CBDC potentially offer a more secure way to ‘store’ (large amounts of) central bank money.

164 Board of Governors of the Federal Reserve System (n 4) 19 et seq.; ECB (n 4) 19 et seq., 36 et seq.; see also Auer and Böhme (n 29) 93 et seq.; M Bech and R Garratt, ‘Central Bank Cryptocurrencies’ (September 2017) BIS Quarterly Review 55, 63 et seq.

165 Board of Governors of the Federal Reserve System (n 4) 14; ECB (n 8) 7; see also U.S. Department of the Treasury (n 25) 26.

166 The technical developments may, to a certain extent, blur the lines between anonymity and pseudonimity; in general, blockchain networks like Bitcoin are nowadays typically described as pseudonymous, not anonymous, see, e.g. De Filippi and Wright (n 62) 68-69.

167 Here, reference is only made to the concepts of Art. 128 TFEU; whether certain measures or CBDC designs conflict with fundamental rights or the GDPR is a different issue and must be assessed separately, cf. Grünewald and others (n 99) 1045 et seq.; C Zellweger-Gutknecht, B Geva and SN Grünewald, ‘Digital Euro, Monetary Objects, and Price Stability: A Lega Analysis (2021) 7 J. Financial Reg. 284, 305-306.

168 Cf., however, Bindseil (n 5) 304 (‘[The absence of a central ledger] is often associated with anonymity, i.e. meaning that the central bank would not know who currently holds the issued tokens (like in the case of banknotes)’).

169 Cf. Crawford and others (n 42) 152; see also Hockett (n 41) at 470 (privacy potentials as a ‘matter of system design’), 478 et seq.; see already D.I. above; see, however, Board of Governors of the Federal Reserve System (n 4) 14; ECB (n 4) 11.

170 See, e.g. Hockett (n 41) at 478 note 558 (referring to 31 C.F.R. § 1010.311 that contains a filing obligation for transactions greater than 10.000 USD); Art. 2(1)(3)(e), 11(c) Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC [2015] OJ L 141/73; cf. Freitag (n 100) 607-609. See also Art. 3 Regulation (EU) 2018/1672 (‘Carriers who carry cash of a value of EUR 10 000 or more shall declare that cash to the competent authorities of the Member State through which they are entering or leaving the Union and make it available to them for control’).

171 See for an overview of euro zone Member States that apply limits on cash transactions M Schroth, M Vyborny and L Ziskovsky, ‘Should the use of cash be limited?’ (2022) Monetary Policy & The Economy 109, 112–113 <https://www.oenb.at/Publikationen/Volkswirtschaft/Geldpolitik-und-Wirtschaft/2022/monetary-policy-and-the-economy-q1-q2-22.html> accessed 2 December 2022. The ECJ generally considers limits on cash payment compatible with the free movement of capital, see Case C-544/19, Ecotex Bulgaria v Teritorialna direktsia na Natsionalnata agentsia za prihodite [2021] ECLI:EU:C:2021:803.

172 Commission, ‘Proposal for a Regulation of the European Parliament and of the Council on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing’ COM(2021) 420 final, Art. 59(1) (‘Persons trading in goods or providing services may accept or make a payment in cash only up to an amount of EUR 10 000 or equivalent amount in national or foreign currency, whether the transaction is carried out in a single operation or in several operations which appear to be linked’).

173 See Section D. above.

174 ECB, ‘Exploring anonymity in central bank digital currencies’ (2019) 6 <https://www.ecb.europa.eu/paym/intro/publications/pdf/ecb.mipinfocus191217.en.pdf> accessed 2 December 2022 (‘anonymity vouchers’); ECB, Report on a Digital Euro (n 5) 27 (selective privacy). Art. 34-6 COM(2023) 369 final contain rules on privacy for the digital euro.

175 Grünewald and others (n 99) 1048.

176 See E.II.3. above.

177 See Dumitrescu-Pasecinic (n 64) 252-253.

178 Joined Cases C-422/19 & C-423/19, Dietrich and Häring, [55-56].

179 Cf. Freitag (n 100) 597.

180 These thoughts concern the payee’s perspective; an ‘obligation to use technology’ for the payer would not arise unless cash would be abolished altogether; however, neither the Fed nor the ECB has accounted plans to this end.

181 This applies mutatis mutandis to coins; see on the delineation from banknotes E.IV.5.

182 Statutory specifications on the status of legal tender are not unprecedented in EU law. An example can be found in Art. 11 Regulation (EC) No 974/98 that refers to coins (‘Except for the issuing authority and for those persons specifically designated by the national legislation of the issuing Member State, no party shall be obliged to accept more than 50 coins in any single payment’); see also Freitag (n 100) 600, 602-603.

183 Cf. ECB (n 4) 33 (‘The decision to assign legal tender status to the digital euro would in practice require that it be usable in any place and under all conditions, to allow the unconditional acceptance of payments. Legal tender status would require that users be able to receive incoming payments through means that are as user-friendly as banknotes, for example by using a simple physical device that can also be used offline […]’). The implementation of such an instrument of secondary law would have to comply with primary law; in this connection, it should be noted that the legal tender status of banknotes is – different from coins – based on primary and not secondary law; see E.II.3. Art. 16(2) of the ESCB/ECB Statute states that the ‘ECB shall respect as far as possible existing practices regarding the issue and design of banknotes’. However, this provision does not seem to rule out digital forms of banknotes, see Banque de France (n 35) 31; see also Dumitrescu-Pasecinic (n 64) 252. On the different question how access to CBDC could legally be ensured see Nabilou and Prüm (n 5) 1097–88; on the advantages of cash over digital forms of payments see Siekmann (n 130) 47–8.

184 See Art. 9–10 COM(2023) 369 final.

185 The current rules on banknotes and coins (see, e.g. Decision of the European Central Bank of 19 April 2013 on the denominations, specifications, reproduction, exchange and withdrawal of euro banknotes (ECB/2013/10) (2013/211/EU) [2013] L 118/37; Council Regulation (EU) No 729/2014 of 24 June 2014 on denominations and technical specifications of euro coins intended for circulation [2014] OJ L 194/1) clearly refer to physical tokens and do not fit CBDC. See on the delineation of powers under Art. 128 and Art. 133 TFEU Grünewald and others (n 99) 1040 et seq.

186 Coins are not regulated in the ESCB/ECB Statute because their issuance is not a competence of the ECB, see Smits (n 72) 205.

187 Cf. Dumitrescu-Pasecinic (n 64) 252

188 Chiu (n 33) 451-452; see also Banque de France (n 35) 31.

189 It should also be noted that Art. 5 Regulation (EU) No 651/2012 of the European Parliament and of the Council of 4 July 2012 on the issuance of euro coins [2012] OJ L 201/135 contains special rules with regard to (the denomination of) collector coins.

190 Admittedly, the ECJ – though on an unclear methodological basis – relied on secondary law to give meaning to Art. 128 TFEU, see Joined Cases C-422/19 & C-423/19, Dietrich and Häring, [63 et seq.]. Cf. on the issue also Siekmann (n 130) 44 et seq.; H Siekmann, ‘Restricting the Use of Cash in the European Monetary Union’ (2016) IMFS Working Paper Series No 108 20 et seq.

191 On the historical development of money see, e.g. C Desan, ‘Money as a Legal Institution’ in D Fox and W Ernst (eds), Money in the Western Legal Tradition: Middle Ages to Bretton Woods (Oxford University Press 2016) 18.

192 Cf. the discussion on the U.S. Constitution above.

193 Admittedly, however, the intrinsic value may be (much) lower than the face value, see B Krauskopf, ‘How Euro Banknotes Acquire the Properties of Money’ in ECB (n 155) 243, 246 et seq. (fiduciary money).

194 Cf. also Proctor (n 72) 28 et seq. (distinguishing medium of exchange and object of exchange).

195 Hence, since the intrinsic value matters, Art. 128 TFEU would arguably permit the introduction of non-metal coins (e.g. made of gemstones). The same applies, mutatis mutandis, to banknotes made of plastic. At the same time, however, it seems indispensable that the note permanently displays its face value because otherwise it would fail to serve its purpose as a unit of account. See also on the ‘written’ property of banknotes Geva and others (n 41) 1127–28.

196 The terms ‘printing’ and ‘minting’ are used in a non-technical sense and do not refer to the separate acts of physically producing banknotes or coins vis-à-vis putting them into circulation.

197 From this perspective, the TFEU’s ‘binary’ distinction between banknotes and coins does not hinder the introduction of a CBDC; see, however, MM Prates, ‘Money in the Twenty-First Century: From Rusty Coins to Digital Currencies’ (2021) 15 Ohio St. Bus. L. J., 164, 228 (‘This binary distinction between paper currency and coins may hinder the creation of a ‘digital euro’ if the legal framework is not adjusted. As the legal rules characterise the two forms of money that can be issued, adding a third one (the digital form) through interpretation could face pushback’, footnotes omitted).

198 See, e.g. A Belke and E Beretta, ‘From cash to central bank digital currencies and cryptocurrencies: a balancing act between modernity and monetary stability’ (2020) 47 J. of Econ. Studies 911, 917, 929–30; S Shcherbak, ‘How Should Bitcoin be Regulated’ (2014) 7 European J. of L. Studies 45, 50, 57.

199 One might also argue that the term ‘coin’ should be interpreted narrowly vis-à-vis ‘banknotes’, cf. Grünewald and others (n 99) 1038 et seq.; Siekmann (n 130) 49 (‘As the right of the Member States to issue coins appears as a historic reminiscence without economic justification, an electronic euro banknote, authorised by the ECB, would be the only debatable option if at all’); cf. also Krauskopf (n 193) 248 (‘By contrast, the value of the material or the redemption commitment are meaningless. Distinguishing between coins and paper money within the same monetary legislation is no longer appropriate’) (footnotes omitted). See, however, Alessio Azzutti, Removing euro banknotes and coins from circulation: on the legal possibility for a digital euro as the only legal tender within the EU legal and monetary system (Dissertation, Utrecht University, 2018) 110 et seq. (proposing a digital euro coin).

200 From a technical perspective, direct control of the CBDC user would have to be ensured. Functional equality to ‘regular’ cash would also imply, for instance, that the digital euro banknote must not be interest-bearing, Grünewald and others (n 99) 1035–36, 1047, 1053; Zellweger-Gutknecht and others (n 167) 316–7.

201 Cf. Geva and others (n 41) 1143–4. Mooij (n 36) 93 argues that the introduction of a retail (general purpose) CBDC cannot solely be based on Art. 128 TFEU because of its lack of intermediation (‘Consumers who currently wish to obtain legal tender (cash), cannot do so via the central bank directly. Furthermore converting commercial money to CBDC can be incorporated through intermediaries. Thus a general purpose CBDC which is directly accessible through NCBs cannot be introduced based solely upon article 128 TFEU’). It is unclear why, according to this reading, Art. 128 TFEU should necessarily require a (certain degree of) intermediation; the wording of the article does not contain a corresponding limitation, simply stating that the ‘European Central Bank and the national central banks may issue such notes.’ However, it should be mentioned that the Mooij focuses on account-based CBDC, see ibid. at 91, 103–4.

202 Some authors argue that the ECB is – in light of the declining use of cash – both entitled and obliged to introduce a digital euro on the basis of Art. 128 TFEU, see Zellweger-Gutknecht and others (n 167).