COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT REPORT Accompanying the documents Proposal for a Regulation of the European Parliament and of the Council on the establishment of the digital euro and Proposal for a Regulation of the European Parliament and of the Council on the provision of digital euro services by payment services providers incorporated in Member States whose currency is not the euro and amending Regulation (EU) 2021/1230 of the European Parliament and the Council and Proposal for a Regulation of the European Parliament and of the Council on the legal tender of euro banknotes and coins
Date: 2023-06-28
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: Economic and Monetary Union, electronic banking, euro, euro area, financial services, financial transaction, issuing of currency, money, payment, regulation of transactions

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 28.6.2023  SWD(2023) 233 final  COMMISSION STAFF WORKING DOCUMENT  IMPACT ASSESSMENT REPORT     Accompanying the documents    Proposal for a Regulation of the European Parliament and of the Council on the establishment of the digital euro  and  Proposal for a Regulation of the European Parliament and of the Council on the provision of digital euro services by payment services providers incorporated in Member States whose currency is not the euro and amending Regulation (EU) 2021/1230 of the European Parliament and the Council  and  Proposal for a Regulation of the European Parliament and of the Council on the legal tender of euro banknotes and coins {COM(2023) 364 final} - {COM(2023) 368 final} - {COM(2023) 369 final} - {SEC(2023) 257 final} - {SWD(2023) 234 final}  
 
 
Table of contents 

1. 

INTRODUCTION: POLITICAL AND LEGAL CONTEXT ..........................................................6 

1.1 

1.2 

Political context ..............................................................................................................6 

Legal context ................................................................................................................ 11 

2 

PROBLEM DEFINITION ................................................................................................................ 13 

2.1 

2.2 

2.3 

Problem to be addressed by this initiative ................................................................ 13 

Drivers .......................................................................................................................... 16 

Consequences ............................................................................................................... 20 

2.4  How will this problem evolve without further action .............................................. 24 

3  WHY SHOULD THE EU ACT? ...................................................................................................... 26 

3.1 

3.2 

Legal basis.................................................................................................................... 26 

Subsidiarity: Necessity and added value of EU action ............................................ 27 

4 

OBJECTIVES: WHAT IS TO BE ACHIEVED? ........................................................................... 27 

4.1  General objective ........................................................................................................ 27 

4.2 

4.1 

Specific objectives ....................................................................................................... 28 

Intervention logic ........................................................................................................ 28 

5  WHAT ARE THE AVAILABLE POLICY OPTIONS? ................................................................ 30 

5.1 

5.2 

Baseline - no digital euro ............................................................................................ 30 

Establishing and regulating a digital euro ................................................................ 30 

5.3  Options discarded at an early stage ........................................................................... 46 

6  WHAT  ARE  THE  IMPACTS  OF  THE  POLICY  OPTIONS  AND  HOW  DO  THEY 

COMPARE? ....................................................................................................................................... 47 

6.1 

6.2 

Baseline – no digital euro............................................................................................ 47 

Establishing and regulating the digital euro ............................................................. 49 

7 

PREFERRED POLICY OPTION .................................................................................................... 79 

7.1 

Preferred policy option ............................................................................................... 79 

7.2  Overall impact of preferred option ........................................................................... 81 

7.3 

7.4 

7.5 

Impact on small and medium sized enterprises ....................................................... 88 

REFIT (simplification and improved efficiency) ..................................................... 88 

“One In One Out” ....................................................................................................... 88 

8 

HOW WILL ACTUAL IMPACTS BE MONITORED AND EVALUATED? ............................ 89 

ANNEX 1 - PROCEDURAL INFORMATION ............................................................................................ 92 

ANNEX 2 - STAKEHOLDER CONSULTATIONS .................................................................................... 98 

I. 

II. 

Results of the ECB’s public consultation on the digital euro .................................. 98 

Summary of a ECB commissioned study on new digital payment methods ........ 100 

III.  Results of the Commission’s targeted consultation on the digital euro ............... 102 

IV.  Results of the call for evidence on the digital euro ................................................. 125 

ANNEX 3 - WHO IS AFFECTED AND HOW? ........................................................................................ 129 

1 

 
 
1. 

2. 

PRACTICAL IMPLICATIONS OF THE INITIATIVE ............................................................. 129 

SUMMARY OF COSTS AND BENEFITS.................................................................................... 131 

3.  RELEVANT SUSTAINABLE DEVELOPMENT GOALS ......................................................... 135 

ANNEX 4 - ANALYTICAL METHODS ................................................................................................... 137 

ANNEX 5 - TECHNICAL GLOSSARY .................................................................................................... 138 

ANNEX 6 - CASH USAGE ........................................................................................................................ 143 

ANNEX 7 - LEGAL TENDER FOR CASH ............................................................................................... 148 

ANNEX  8  -  PAYMENTS  IN  WEB 3.0  AND  INDUSTRY  4.0; THE  NEED  FOR  “CONDITIONAL 

PAYMENTS”; STABLE COINS ...................................................................................................... 157 

ANNEX 9 - INTERNATIONAL USE OF A DIGITAL EURO ................................................................. 169 

ANNEX 10 - THIRD COUNTRIES AND NON-EURO AREA CBDCS .................................................. 178 

ANNEX 11 - FINANCIAL STABILITY AND MACROECONOMIC IMPACT ...................................... 181 

ANNEX 12 - APPLYING UNION DATA PROTECTION LAW TO THE DIGITAL EURO .................. 196 

ANNEX 13 - SME TEST ............................................................................................................................ 204 

2 

 
 
 
 
 
Glossary 

Term or acronym 

Meaning or definition 

Application Programming 
Interface (API) 

Interface that enables data transmission and thus interoperability between 
two different systems. 

Central Bank Digital 
Currency (CBDC) 

A CBDC is a form of official currency which constitutes a liability of a 
central bank, is issued and stored digitally.  

Central bank money  

Commercial bank money 

Crypto-asset 

Digital euro 

Distributed Ledger 
Technology (DLT) 

Domestic card scheme 

Electronic money 

European Digital Identity 
Wallet (EUDIW) 

It consists of banknotes and coins in circulation (cash) and the electronic 
accounts that credit institutions hold at the central banks (reserves). Cash 
has  the  status  of  legal  tender  unlike  commercial  bank  money.  Central 
bank money is credit and liquidity risk-free as the default risk of a central 
bank is in principle non-existent. 

Liability  of  a  commercial  bank,  in  the  form  of  deposits  held  at  the 
commercial bank, which can be used for settlement purposes. Commercial 
bank  money does not have the status of legal tender and carries a credit 
risk (i.e. the risk of default of a commercial bank).  

Crypto-asset means a digital representation of a value or of a right that is 
able  to  be  transferred  and  stored  electronically  using  distributed  ledger 
technology or similar technology. 

The digital euro is a retail central bank digital currency (CBDC) that the 
Eurosystem may decide to issue. It would be accessible to all citizens and 
businesses and available for payments 

to  solve 

Distributed  ledger  technology  (DLT)  refers  to  a  family  of  technologies 
aiming 
the  problem  of  reaching  a  consensus  between 
participating  entities,  which  is  required  for  validating  data  and  updating 
the distributed ledger, without relying on  a central authoritative entity to 
mandate ledger updates. 

A payment card scheme, typically a debit card scheme, that for the most 
part  operates  in  a  single  country,  for  instance  Carte  Bancaire  in  France, 
Bancontact in Belgium, or Dankort in Denmark. 

A  subcategory  of  commercial  bank  money  is  an  electronic  store  of 
monetary value that may be widely used for making payments. Electronic 
money is issued by an electronic money institution/credit institution upon 
deposit  of  funds  (e.g.  pre-paid  cards)  and  does  not  have  therefore  an 
impact  on  money  creation.  In  the  EU,  e-money  is  regulated  by  the  e-
money directive.   

The  EUDIW  allows  the  user  to  store  identity  data,  credentials  and 
attributes linked to her/his identity, to provide them to relying parties on 
request  and  to  use  them  for  authentication,  online  and  offline,  and  to 
create  qualified  electronic  signatures  and  seals.  It  is  part  of  the 
Commission’s  proposal  for  a  regulation  amending  Regulation  (EU)  No 
910/2014  as  regards  establishing  a  framework  for  a  European  Digital 
Identity.  

European Payments 

Private  initiative  to  create  a  new  pan-European  payment  solution 

3 

 
 
 
Initiative (EPI) 

leveraging Instant Payments and the creation of digital wallets. 

Industry 4.0 

Industry  4.0  refers  to  the fourth industrial  revolution representing  a  new 
stage  of  digital  transformation  for  manufacturing/production  and  value 
creation processes. It is an interconnected data driven industry where the 
convergence  of  Artificial  Intelligence,  Internet  of  Things  and  DLT 
supports automated decision-making by machines 

Instant payments 

Credit transfer which arrives on the payee’s account within ten seconds of 
the sending of a payment order by the payer 

ICS 

Legal tender 

International  Card  Schemes 
Mastercard, Visa, etc.) 

(e.g.,  American  Express,  Discover, 

Legal  tender  is  a  means  of  payment  whose  acceptance  is  mandatory  by 
default (i.e. unless its acceptance is restricted for reasons of public interest 
or  waived  by  contractual  agreement),  at  its  full-face  value,  for  the 
discharge of payment obligations. 

Peer-to-peer (P2P) 

Peer-to-peer  is  a  communication  structure  in  which  individuals  interact 
directly, without going through a centralized system or hierarchy. 

Point Of Interaction (POI)  The initial point in the payee’s environment where data is exchanged with 
a payer device or where consumer data is entered to initiate a digital euro 
transaction  

Point of Sales (POS) 

‘Point of Sale’ means the address of the physical premises of the merchant 
at which the payment transaction is initiated.  
 In  the  case  of  distance  sales  or  distance  contracts  (i.e.  e-commerce),  the 
point of sale shall be the address of the fixed  place of business at which 
the  merchant  conducts  its  business  regardless  of  website  or  server 
locations through which the payment transaction is initiated. 

Payment Service Provider 
(PSP) 

A  provider  of  payment  services  as  defined  in  Annex  I  of  Directive 
2015/2366 (PSD2), including a credit institution, payment institution and 
electronic money institution 

Payment scheme 

Retail CBDC 

Retail payment 

A  single  set  of  rules,  practices,  standards  and/or  implementation 
guidelines  agreed  between  payment  service  providers  (PSPs)  for  the 
execution  of  payment  transactions  across  the  Union  and  within  Member 
States, and which is separated from any infrastructure or payment system 
that supports its operation 

A retail CBDC is a central bank liability issued in digital form for use by 
the general public (e.g. citizens, businesses and government entities) when 
making retail payments. 

Payment 
transaction  between  consumers,  businesses  and  public 
authorities,  with  the  exclusion  of  payments  made  by  payment  service 
providers  on  their  own  account  or  on  behalf  of  other  payment  service 
providers. 

Stablecoin 

A crypto-asset that references a fiat currency or a portfolio of liquid assets 
to stabilise its market value.  

4 

 
 
 
 
Web 3 

The term web 3 refers to a vision for the third generation of computing, 
which  would  shift  power  from  platforms  to  users  by  means  of 
technologies that support decentralisation and P2P interactions. Web3 has 
a  user  centric  vision  where  users  not  only  consume  services  but  also 
participate in the governance and retain more control over their own data.    

Wholesale CBDC 

A  wholesale  CBDC  is  a  central  bank  liability  issued  in  digital  form  for 
use  by  eligible  entities  only  (usually  banks)  for  payments  and  not  for 
general use by people and businesses.  

5 

 
 
 
 
 
1. 

INTRODUCTION: POLITICAL AND LEGAL CONTEXT  

1.1 

Political context  

Digitalisation  and  new  technologies  are  increasingly  shaping  European  citizens’  lives 
and the European economy. With the European economy becoming more and more digital, 
Europeans  also  increasingly  use  digital  means  of  payment  to  transact.  The  socio-economic 
impacts  of  the  COVID-19  crisis  accelerated  this  trend  and  increased  the  need  to  allow 
business  to  be  conducted  remotely  and  through  innovative  digital  technologies,  wherever 
possible.  As  President  von  der  Leyen  stated  in  her  Political  Guidelines  for  the  current 
Commission1, it is crucial that Europe can reap all the benefits of the digital age and that it 
strengthens its industry and innovation capacity in a safe and ethical way. In this context, a 
digital euro – as a retail central bank digital currency to be issued by the Eurosystem – can 
play  an  important  role.  The  conference  on  the  future  of  Europe  further  stressed  the 
importance  of  “consolidating  what  has  been  done  in  terms  of  the  single  currency  and  the 
interconnection  of  payment  systems  and  telecommunications”.2  The  digital  euro  would 
contribute to achieving that objective.3 

The  Eurosystem  provides  safe  money  and  reliable  means  of  payments  to  households, 
businesses and the broader financial system in the euro area. By pursuing its objective of 
maintaining  price  stability  i.a.  through  the  task  of  promoting  the  smooth  operation  of 
payment  systems,  it  ensures  that  money  and  payments  serve  European  society.4  However, 
while still prevalent, the use of euro banknotes and coins for payments in the euro area has 
been  in  decline  over  the  past  decade  due  to  the  progress  of  digitalisation  and  changing 
consumer preferences. Moreover, in a digitalising economy, central bank money such as that 
offered to households and businesses in its current form cannot be used for digital payments. 
This  raises  questions  about  the  function  of  central  bank  money  as  ‘monetary  anchor’  for 
private  money  created  by  commercial  banks  and  other  payment  service  providers.  Namely, 
without  widely  available  and  usable  central  bank  money  and  the  option  to  convert  private 
money  into  it,  trust  in  private  forms  of  money  in  the  digital  environment  could  decline 
especially  during  a  financial  crisis,  to  an  extent  that  users  lose  confidence  in  euro 
denominated  digital  forms  of  private  money.  Eventually,  such  decline  of  trust  could  also 
undermine  trust  in  the  euro  as  such.  This  makes  it  thus  important  to  safeguard  the  role  of 
central bank money in all its forms, also in an increasingly digitalised economy. 

In  this  context,  the  possibility  to  introduce  a  retail  digital  euro  has  received  support 
from Member States, the European Parliament and the European Central Bank. At the 
Euro  Summit  of  March  2021  Member  States  and  the  ECB  called5  for  a  stronger  and  more 
innovative digital finance sector and for more efficient and resilient payment systems, stating 
that  exploratory  work  on  a  central  bank  digital  currency,  the  digital  euro,  should  be  taken 
forward. This followed the joint statement of the Council and the European Commission on 
stablecoins issued in 2019. The Council Recommendation on the economic policy of the euro 
area  for  2022  further  stressed  that  depending  on  its  design,  a  central  bank  digital  currency 
could,  inter  alia,  (i)  offer  a  supply  of  public  money  in  digital  form,  (ii)  support  the 
digitalisation  of  the  European  economy,  (iii)  actively  encourage  innovation  in  retail 

1 https://www.consilium.europa.eu/media/48975/25-03-21-eurosummit-statement-en.pdf 
2 Conference on the future of Europe, report on the final outcome, May 2022 
3 Commission communication, “Conference on the future of Europe, putting vision into concrete action”, COM (2022) 404 final 
4 ECB Report on a Digital Euro, October 2020, page 1.  
5 https://www.consilium.europa.eu/media/48975/25-03-21-eurosummit-statement-en.pdf 

6 

 
 
                                                           
payments, and (iv) contribute to strengthening the international role of the euro and Europe’s 
open  strategic  autonomy.  In  its  25  February  2022  statement6,  the  Eurogroup  also 
acknowledged  that  “a  properly  designed  digital  euro  that  is  safe,  easy  to  use  and  widely 
accessible  to  the  public  has  the  potential  to  foster  innovation  in  the  financial  system  and 
deliver  major  benefits  for  citizens,  businesses  and  Member  States”.  A  further  statement 
adopted on 16 January 2023 reaffirmed the Eurogroup's support for the ongoing preparatory 
work for the potential issuance of a digital  euro, encouraged a high level of innovation and 
ambition  and  recalled  the  Eurogroup's  intention  to  continue  to  play  an  active  role  in  the 
process.7 The European Parliament resolution of 16 February 2022 on the European Central 
Bank  –  annual  report  20218  also  welcomed  the  ECB’s  decision  to  launch  a  24-month 
investigation  phase  of  a  digital  euro  project.  This  decision  was  also  welcomed  by  the 
ECOFIN on 29 March 2022.9 

Participants in the ECB’s public consultation, the Commission’s targeted  consultation 
and  the  Conference  on  the  digital  euro  overall  supported  the  introduction  of  a  digital 
euro.  Even  though  the  sample  of  participants  could  not  be  deemed  representative  of  the 
European  population,  most  of  the  respondents  to  the  ECB’s  public  consultation  (October 
2020 – January 2021) 10 appeared to support the digital euro, on condition that cash would not 
be  discontinued.  Privacy  was  considered  the  most  important  feature  for  the  digital  euro  by 
both  people  and  professionals  participating  in  the  consultation.  People  also  highlighted  the 
importance  of  security,  usability  throughout  the  euro  area,  absence  of  additional  costs  and 
usability  offline.  Respondents  to  the  Commission’s  targeted  consultation  (April  –  June 
2022)11,  whose  purpose  was  to  complement  the  ECB’s  public  consultation  with  further 
information gathered from professionals, insisted on the need for the digital euro to be fast, 
cost  free,  widely  available  and  to  ensure  a  high  level  of  privacy.  The  Conference  on  the 
digital euro organized by the Commission and the ECB on 7 November 202212 confirmed the 
interest of policy makers and stakeholders in the deployment of the digital euro, alongside the 
Commission’s  determination  to  ensure  that  everyone  will  continue  to  have  access  to  euro 
cash in the future., 

The digital euro legislative proposal is part of the Commission Work Programme 2023 
under the headline of “An economy that works for people”. 

The  Digital  Finance  and  Retail  Payment  Strategies  of  the  Commission13  of  September 
2020  supports  the  emergence  of  competitive  pan-European  payment  solutions  and  the 
exploration  of  a  digital  euro  as  a  possible  complement  to  euro  cash.  The  digital  euro 
should be considered in the context of ongoing efforts to reduce the fragmentation of the EU 
retail  payments  market,  promote  competition  and  innovation,  including  the  full  roll-out  of 
instant payments and encourage industry initiatives to offer pan-European payment services. 
In  its  Retail  Payment  Strategy,  the  Commission  also  committed  to  safeguarding  the  legal 
tender  of  euro  cash,  and  to  this  end  established  the  Euro  Legal  Tender  Expert  Group.14  As 
outlined in  the Commission  digital  finance strategy, digital  technologies  also  hold  potential 

6 https://www.consilium.europa.eu/en/press/press-releases/2022/02/25/eurogroup-statement-on-the-digital-euro-project/ 
7 https://www.consilium.europa.eu/en/press/press-releases/2023/01/16/eurogroup-statement-on-the-digital-euro-project-16-january-2023/ 
8 2021/2063(INI) 
9 https://data.consilium.europa.eu/doc/document/ST-6301-2022-INIT/en/pdf 
10 Eurosystem report on the public consultation on a digital euro (europa.eu) 
11 finance-2022-digital-euro (europa.eu) 
12 High level conference: Towards a legislative framework enabling a digital euro for citizens and businesses (europa.eu) 
13 https://ec.europa.eu/info/publications/200924-digital-finance-proposals_en 
14 The Euro Legal Tender Expert Group (ELTEG) consists of representatives of national central banks and finance ministries of the euro 
area and the ECB and is chaired by the Commission services. 

7 

 
 
                                                           
for central banks to develop central bank digital currencies (CBDC) as a digital alternative to 
cash and a catalyst for continued innovation in payments, ﬁnance and commerce.  

The retail digital euro has also been identified as an element of the Commission strategy 
the  2021  Commission 
to  support  open  EU  strategic  autonomy.  In  particular, 
Communication  on  The  European  economic  and  financial  system:  fostering  openness, 
strength  and  resilience  identified  “the  euro  in  the  digital  era”  as  one  way  to  deliver  on  the 
International  Role  of  the  Euro  (IROE)  agenda.  The  ECB  recognises  that  the  issuance  of 
CBDCs  by  major  third  countries  central  banks  (e.g.  China,  the  United  States  of  America, 
United Kingdom) could enhance the status of other international currencies at the expense of 
the euro and might therefore consider issuing a digital euro in part to support the international 
role of the euro.15  

What would a digital euro be? 

The  idea  of  retail  Central  Bank  Digital  Currencies  (CBDC)  has  gained  significant 
attention over recent years. A retail CBDC, like cash, would be an official form of currency 
constituting a direct central bank liability towards its holder in digital form. A retail CBDC 
makes central bank digital money available to the general public (i.e. businesses and people), 
in  the  same  way  as  cash  is  available  to  the  general  public  as  a  direct  claim  on  the  central 
bank.  This  complements  in  the  current  monetary  system  the  electronic/digital  means  of 
payment  offered  by  the  private  sector  on  the  basis  of  commercial  bank  money,  which 
represents a credit claim of its holder towards the account holder’s bank (see Chart 1 below). 
As  liability  of  a  commercial  bank,  commercial  bank  money  carries  an  intrinsic  credit  risk, 
while a CBDC is – like cash – a credit risk-free liability of a central bank. Central banks are 
considering  or  engaged  in  similar  projects  in  many  other  jurisdictions.16  Currently,  central 
banks  in  The  Bahamas,  China,  the  Eastern  Caribbean  Currency  Union  and  Nigeria  have 
issued or are piloting a live retail CBDC, and it is likely that other jurisdictions will follow.17 

15 Report on a digital euro, ECB, October 2020 
16 A survey by the Bank for International Settlements in 2021 found that 86% of surveyed central banks were actively researching the 
potential for central bank digital currencies, 60% were experimenting with the technology and 14% were deploying pilot projects.  
17 In the 2022 BIS survey (“Gaining momentum – Result of the 2021 BIS survey on CBDC, 68% of the 81 central bank respondents said 
they were either likely to issue a retail CBDC or “might possibly” do so. See Annex 10 for further details.  

8 

 
 
 
 
                                                           
Chart 1: The monetary system with a retail CBDC 

In the euro area, the establishment of a retail CBDC – a digital euro – could support a 
stronger  and  more  innovative  digital  finance  sector  and  more  efficient  and  resilient 
payment  systems.  A  digital  euro  could  play  a  role  in  further  enhancing  competition  and 
innovation in the European retail payments market by facilitating the development of a full 
range  of  pan-euro  area  end-user  solutions  accessible  to  consumers  as  well  as  supporting 
digital  financial  services.  This  is  conditional  on  the  digital  euro  itself  being  competitive  as 
compared to  alternative  means of payment  at  the physical  POS  or online.  According  to  the 
ECB,18 as people increasingly shift towards digital payments, it is imperative to ensure that 
they  continue  to  have  access  to  central  bank  money,  the  fundamental  underpinning  of  the 
euro.  This  is  also  key  to  strengthening  the  open  strategic  autonomy  of  the  euro  area  and 
important for the efficiency of payments. 

The  ECB  is  investigating  until  October  2023  the  key  design  and  technical  questions 
related to the potential  issuance of a digital  euro. The ECB issued its report on a digital 
euro in October 2020 and ran a public consultation on a digital euro between October 2020 
and January 2021. In the light of digitalisation and rapid changes in the payment landscape, 
the  ECB’s  Governing  Council  decided  in  July  2021  to  launch  a  two-year  investigation 
phase,19  starting  from  October  2021,  to  explore  the  possibility  of  issuing  a  digital  euro  to 
complement  cash  and  payment  solutions  supplied  by  the  private  sector.  The  ECB’s 
investigation phase  could  be followed by a realisation phase with  a view of developing the 
infrastructure  and  scheme  necessary  to  the  possible  future  establishment  and  issuance  of  a 
digital euro. The creation of a digital euro would require a Regulation, to be adopted by the 
Union  legislature,  establishing  and  regulating  the  essential  aspects  of  the  digital  euro.  The 
present document aims to assess the impacts of that legislative act. 

The  upcoming  Regulation  and  the  ECB’s  investigation  phase  focus  on  a  retail  central 
bank  digital  currency  as  opposed  to  a  “wholesale”  central  bank  digital  currency.  A 
digital  currency  can  be  issued  for  the  exclusive  use  by  regulated  financial  institutions 
(’wholesale CBDC’) or for use by the general public (’retail CBDC’). The term retail is used 
in opposition to wholesale but does not mean that its use is restricted to a specific category 
(e.g. person-to-person payments or e-commerce). In the same way as banknotes may be used 
(albeit rarely) in the business-to-business payment segment, a similar logic applies to digital 

18 The case for a digital euro: key objectives and design considerations, July 2022, 
https://www.ecb.europa.eu/pub/pdf/other/key_objectives_digital_euro~f11592d6fb.en.pdf?da26139651d23580c8c0af69b21968dd 
19 https://www.ecb.europa.eu/press/pr/date/2021/html/ecb.pr210714~d99198ea23.en.html 

9 

 
 
 
                                                           
euro. A digital central bank money for wholesale transactions between financial institutions 
already exists in the form of Eurosystem’s TARGET services.20. 

A retail CBDC aims to serve the payment needs of people and businesses with a focus 
on their retail payments. Possible use cases include: 

  Peer-to-peer  or  person-to-person  payments  (P2P):  transferring  money  to  another 

person e.g. buying from another person or handing over money as a gift; 

  Person-to-business  (P2B)  or  more  generally  customer  to  business  payments  (C2B) 

e.g. paying at point of sale (POS) in shops and on the internet (e-commerce);  

  Person-and-business-to-government  payments  (X2G)  e.g.  paying  taxes,  duties,  fines 
to  local  and  central  government  or  governments  paying  e.g.  transfers,  subsidies, 
rebates to people and businesses; 

  Business-to-business  payments  (B2B),  e.g.  invoicing  are  also  classified  as  retail 
payments  and  are  performed  so  far  mostly  through  credit  transfers  between  bank 
accounts; 

  Machine-to-machine payments (M2M) can work without human interaction and may 
include  for  example  payments  in  the  context  of  the  Internet  of  Things  (IoT)  in  the 
industry  4.0  era  (e.g.  automatic  recharging  of  cars,  automatic  order  of  supply  for 
manufacturing, logistical services, deliveries). 

A  digital  euro  is  not  a  crypto-asset  or  a  stablecoin.  A  crypto  asset  is  a  digital 
representation of value or rights which may be transferred, stored, and traded electronically 
using DLT or similar technology. A stablecoin typically also uses the DLT technology but in 
addition  aims  to  anchor  its  value  in  reference  to  more  reliable  assets  e.g.  currencies  (USD, 
EUR), commodities (gold, silver) or other assets and their combinations. The digital euro in 
contrast  would  be  issued  as  a  central  bank  liability,  which  anchors  its  value  (just  like  for 
cash).  The  concept  of  a  digital  euro  is  technology-neutral  i.e.  it  may  or  may  not  use 
DLT/blockchain technology or certain aspects of these technologies, such as for example the 
unspent transaction output (UTXO) model.21 A digital euro may also build on existing credit 
transfer and payment systems, e.g. TARGET2,22 or its dedicated service for instant payments, 
TIPS.23 Consequently, the digital euro would be a form of central bank money, thus free from 
credit and liquidity risk, while crypto assets and stablecoins entail considerable risks (value, 
credit, liquidity) for their holders. 

20 Target2(T2) for wholesale payments, Target2 Securities (T2S) for the settlement of securities in central bank money and the Target Instant 
Payment  Settlement  (TIPS)  service  for  instant  payment.  Over  the  past  years,  the  Eurosystem  has  been  working  on  a  new  consolidated 
TARGET platform to offer the market enhanced and modernised services and in July 2021, the ECB’s Governing Council decided to launch 
a  new  Eurosystem  work  stream  in  order  to  explore  possible  technological  improvements  in  the  wholesale  infrastructure.  The  new 
consolidated  platform  was  launched  in  November  2022.  Furthermore,  several  Eurosystem  national  central  banks  are  experimenting 
wholesale CBDC projects in the form of tokenized central bank money.  
21 UTXOs are pieces of digital information representing any number of assets that result from a valid transaction in a distributed ledger. In a 
UTXO model, whenever a transaction is valid the UTXOs sent from payer to payee are consumed and can no longer be spent. Only unspent 
holdings, which are reflected in the latest update of the ledger, can be used in new transactions. Source: Project Stella, ECB and Bank of 
Japan, 2018 
22 TARGET2 is the real-time gross settlement (RTGS) system owned and operated by the Eurosystem. Central banks and commercial banks 
can submit payment orders in euro to TARGET2, where they are processed and settled in central bank money, i.e. money held in an account 
with  a  central  bank.  TARGET2  settles  payments  related  to  the  Eurosystem’s  monetary  policy  operations,  as  well  as  bank-to-bank  and 
commercial transactions. 
23 TARGET Instant Payment Settlement (TIPS) is a market infrastructure service launched by the Eurosystem in November 2018. It enables 
payment service providers to offer fund transfers to their customers in real time and around the clock, every day of the year. This means that 
thanks to TIPS, individuals and firms can transfer money between each other within seconds, irrespective of the opening hours of their local 
bank. 

10 

 
 
                                                           
A digital euro, a direct claim on the Eurosystem in digital form for the payment needs 
of people and businesses, may take different forms. The ECB’s digital euro report outlines 
two  uses  of  a  digital  euro.24  The  first  pertains  to  an  offline  use  with  more  cash-like 
functionalities. It would allow transactions to take place without the need of an intermediary 
(e.g.  bank)  to  validate  the  transaction.  Similar  to  cash,  it  would  be  a  bearer  instrument  i.e. 
peer-to-peer  validated25  and  it  would  be  made  available  only  by  means  of  specific  user 
devices (e.g. smartphone or cards) and would work without internet connectivity. The second 
corresponds  to  an  online  use  with  transactions  validated  by  third-party  intermediaries.  This 
may be used e.g. in shops or for e-commerce or in industry 4.0. Those digital euro uses can 
co-exist. 

This initiative ensures that central bank money is made available, also in an innovative 
digital form in addition to its traditional physical form i.e. it does not intend to replace 
cash as a means of payment but to complement it. Cash will continue to serve the people’s 
and businesses’ needs in the EU. To ensure consistency between the legal tender status of the 
digital euro and of euro cash, this impact assessment also analyses how to better define and 
enforce the legal tender status of the euro cash, in the absence of a detailed regulation in EU 
secondary law. 

The  Regulation  on  the  digital  euro  would  be  ‘enabling’  in  nature.  This  means  that  the 
Regulation will establish the digital euro  as a new form of central bank money, regulate its 
essential elements and provide the possibility, but not an obligation, for the ECB to issue the 
digital  euro. Depending  on the developments  and risks described in  the  problem  definition, 
the ECB can decide to issue the digital euro in line with its mandate and tasks. With a view to 
adapting the euro to  technological  changes  and to ensuring its use as a single currency, the 
Regulation  will  establish  the  digital  euro  and  lay  down  necessary  rules  concerning  it,  in 
particular as regards its legal tender status, privacy, AML, distribution, use (limits to its use 
as  a  store  of  value  and  conditions  for  its  use  outside  the  euro-area)  and  essential  technical 
features. The essential technical features include the main functionalities of the digital euro: 
offline, online and conditional payments.  

1.2 

Legal context 

In accordance with Article 3(1)(c) TFEU, the EU has  exclusive competence in the area 
of monetary policy for the Member States whose currency is the euro. The definition and 
implementation  of  the  monetary  policy  of  the  Union  has  been  attributed  to  the  European 
System  of  Central  Banks  (ESCB)26  as  one  of  its  basic  tasks  (Article  127(2)  first  indent 
TFEU).According to the Court of Justice, the concept of ‘monetary policy’ is not limited to 
its implementation through monetary policy measures but also entails a regulatory dimension 
intended to guarantee the status of the euro as the single currency.27 In other words, monetary 
law is part of monetary policy and the regulatory dimension of monetary policy falls under 
the remit of the EU co-legislators.  

A  new  form  of  central  bank  money  available  to  the  general  public,  next  to  banknotes 
and coins, could be established and regulated in its essential elements by a Regulation 
adopted  by  the  Council  and  Parliament  on  the  basis  of  Article  133  TFEU  if  this  is 

24 See Annex 5 for a description of the online and offline digital euro.  
25 A peer-to-peer validated retail CBDC is a payment solution in which payment does not require validation by a third party. 
26 The ESCB comprises the ECB and the national central banks (NCBs) of all EU Member States whether they have adopted the euro or not. 
27 See judgment of 26 January 2021 in Joined Cases C-422/19 and C‑423/19, Hessischer Rundfunk, EU:C:2021:63, paragraph 38). 

11 

 
 
                                                           
necessary for the use of the euro as the single currency. In this framework, one element to 
regulate, among others, would be the legal tender status to the digital euro.28 The concept of 
legal  tender  as  recently  interpreted  by  the  Court  of  Justice29  as  regards  euro  banknotes 
implies:  (i)  mandatory  acceptance,  (ii)  acceptance  at  full  face  value  and  (iii)  power  to 
discharge from payment obligations.30  

Box A - Implications for legal tender of cash 
There  are  two  main  aspects  to  the legal  tender  of  cash:  the  acceptance  of  cash, and  its  access. The 
former is dealt with in the jurisprudence of the European Court of Justice as explained below (and in 
annex  7).  Should  the  Commission  regulate  the  legal  tender  status  of  the  digital  euro  in  secondary 
legislation, it would be in the interests of coherence and better law-making to also regulate the legal 
tender status of cash, and the aspects related to the acceptance of cash which are covered in the CJEU 
ruling  would  be  codified  and  clarified  in  secondary  legislation.  As  this  dimension  concerns 
codification and clarification of Court jurisprudence, there is little margin for policy discretion which 
would  have  significant  impacts.  However,  in  relation  to  access  to  cash  (the  problem  of  which  is 
further developed in the problem definition box B and annex 7), there is scope for policy choice in 
relation  to  the  nature  and  form  of  action  to  be  taken,  and  these  aspects  are  therefore  analysed  in 
dedicated boxes throughout this impact assessment.   
In accordance with the Treaties, issues pertaining to the definition and implementation 
of  monetary  policy  are  the  exclusive  competence  of  the  European  Central 
Bank/Eurosystem. The Regulation cannot therefore interfere with the ECB, an independent 
institution,  as  regards  the  definition  and  implementation  of  monetary  policy.  The  decisions 
whether to issue digital euro, and in what amounts and at which times, can only be taken by 
the Governing Council of the ECB once the Union’s legislature has adopted a Regulation that 
establishes  the  digital  euro,  recognises  the  competence  of  the  Eurosystem  to  issue  it,  and 
regulates its essential aspects, without interfering with the ECB’s exclusive competence and 
independence.  

The provision of retail payments as an activity is mainly31 regulated by the Payment Services 
Directive (PSD2)32. The PSD2 lays down the rights and obligations of the parties involved in 
a  payment  transaction  between-payment  service  users  and  payment  service  providers. 
Payment  Service  providers  can  be  credit  institutions,  e-money  institutions,  or  payment 
institutions33. 

In addition, the Payment Account Directive (PAD)34 supports a universal access to payment 
accounts  and  basic  payment  services  for  financially  excluded  consumers.  The  AML 

28 In the euro area, euro banknotes and coins are so far the only means of payment having the status of legal tender pursuant, respectively, to 
Article 128(1) TFEU and to Article 11 of Council Regulation (EC) No 974/98 of 3 May 1998 on the introduction of the euro. Currently, an 
explicit definition of the legal tender status of euro cash (banknotes) is only set out in the judgment of the Court of Justice of 26 January 
2021 in  Joined  Cases  C-422/19 and C-423/19,  Hessischer  Rundfunk,  EU:C:2021:63.  This judgment interpreted  Article  128(1)  TFEU  and 
referred  to  the  2010  Recommendation  (Commission  Recommendation  2010/191/EU  of  22  March  2010  on  the  scope  and  effects  of  legal 
tender of euro banknotes and coins) 
29 Judgment of 26 January 2021 in Joined Cases C-422/19 and C‑423/19, Hessischer Rundfunk, EU:C:2021:63..  
30 See judgment of 26 January 2021 in Joined Cases C-422/19 and C‑423/19, Hessischer Rundfunk, EU:C:2021:63, paragraph 49.   
31 Other EU Regulations include the Cross-border payments and SEPA Regulations. 
32  Directive  (EU)  2015/2366  of  the  European  Parliament  and  of  the  Council  of  25  November  2015  on  payment  services  in  the  internal 
market. The E-money Directive regulates the issuance of e-money, but payment transactions with E-money are subject to PSD2 rules. 
33 PSD2 also includes a licensing regime for payment institutions, for a list of payment services provided in its annex. E-money institutions 
can also provide any of these services and issue e-money, and credit institutions the same as e-money institutions, and in addition can take 
deposits and grant credit.  
34 Directive 2014/92/EU of the European Parliament and of the Council of  23 July 2014 on the comparability of fees related to payment 
accounts, payment account switching and access to payment accounts with basic features. 

12 

 
 
                                                           
framework for both cash and electronic transfer of funds is governed by the AML Directive35 
and, when adopted, the AML package proposed by the Commission in July 2021.  

Moreover,  the  proposed  Digital  Markets  Act  (DMA),36  will  address  business  practices  of 
gatekeepers  that  may  impede  the  distribution  of  a  digital  euro.  This  includes  in  particular 
granting access to and interoperability with and access to the operating system, hardware or 
software features of mobile devices for the purpose of interoperability with wallets that store 
credentials for initiating digital euro payments.  

Also, the Commission’s proposal for a framework for a European Digital Identity, if adopted, 
will  establish  the  European  Digital  Identity  Wallet.37  The  wallet  will  provide  highly  secure 
and trustworthy electronic identity solutions that can be linked to a variety of attributes and 
allow  for  the  targeted  sharing  of  identity  data  limited  to  the  needs  of  the  specific  service 
requested. Where private relying parties providing services are required by national/Union or 
contract law to use strong customer authentication private relying parties shall also accept in 
an  easily  accessible  and  a  non-discriminatory  manner  the  use  of  European  Digital  Identity 
Wallets.  

Certain  acts  based  on  Article  114  TFEU  (internal  market)  may  need  to  be  adjusted,  in 
particular if the coexistence of digital currencies may give rise to barriers to trade.  

2  PROBLEM DEFINITION  

2.1 

Problem to be addressed by this initiative 

Cash, the only current form of central bank money available to the public, alone is not 
sufficient in the digital age to support the role of public money in the EU’s economy.38 
Cash is not always adapted to today’s and tomorrow’s payment habits and needs. Although 
cash is still predominantly used for small retail purchases, its role seems to be diminishing.39 
This  is  because  businesses  and  consumers  are  increasing  their  share  of  other  types  of 
purchases such as online purchases, which means that for a large share of payments, people 
and businesses do not have the possibility to opt for a central bank issued money. In addition 
and more generally, businesses and consumers are shifting their payment preferences towards 
digital means of payment.  

The lack  of a widely  available and usable central  bank money  in the digital age could 
weaken  the  monetary  anchor  and  thus  diminish  trust  towards  private  money.  Private 
and public money are complementary. People’s confidence in private money is underpinned 
by its convertibility on a one-to-one basis with  the safest  form  of money in  the economy  – 
central  bank  money,  which  serves  as  a  monetary  anchor.  Central  bank  money  is  the  only 
money  whose  face  value  is  intrinsically  guaranteed.  Private  issuers  have  to  rely  on 
convertibility,  as  their  money  is  exposed  to  operational,  credit,  liquidity  and  market  risks. 
These  risks  are  reduced  through  public  policy  safeguards,  such  as  financial  supervision, 

35  Directive  (EU)  2018/843  of  the  European  Parliament  and  of  the  Council  of  30  May  2018  amending  Directive  (EU)  2015/849  on  the 
prevention of the use of the financial system for the purposes of money laundering or terrorist financing. 
36 Proposal for a Regulation of the European Parliament and of the Council on contestable and fair markets in the digital sector (Digital 
Markets Act), COM/2020/842 final. 
37 Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 910/2014 as regards establishing 
a framework for a European Digital Identity, COM/2021/281 final. 
38 Cash can be used in some e-commerce uses cases, such as “cash on delivery” for example. 
39 For more information please see Annex 6 on cash usage. 

13 

 
 
                                                           
capital  requirements  and  deposit  insurance.  Convertibility  at  par  provides  confidence  in 
private  money  because  it  reassures  users  regarding  its  ultimate  value  and  its  usability  for 
payments.40 At the same time, while still prevalent, cash is less and less usable in the digital 
age,  because  it  does  not  have  the  same  product  characteristics  (e.g.  no  remote  (instant) 
payments,  risk of loss, less  convenient)  and does not  cater  for the same  type of demand  as 
digital money (e.g. e-commerce). Lacking a form of a central bank money that can be used in 
the  digital  economy  and  is  convertible  at  par  from  deposits  may  reduce  the  trust  towards 
commercial  bank  money  (monetary  anchor)  and  weaken  the  EU’s  financial  stability  and 
monetary sovereignty. 

The  EU’s  open  strategic  and  monetary  autonomy  may  weaken.  While  today,  private 
solutions  offer  fast  and  efficient  payment  methods  in  the  EU,  payers  do  not  have  the 
possibility  to  pay  with  a  digital  payment  means  offered  by  public  institutions.  Increased 
reliance on private solutions in the digital era without a public alternative may also increase 
the  vulnerability  of  the  EU’s  payment  market  and  thus  its  economy.  In  addition,  in  the 
absence of a central bank digital currency in the euro area, future third country CBDCs and 
non-euro  denominated  global  stablecoins  made  available  to  euro  area  residents  may  reduce 
the role of the euro and gradually undermine monetary sovereignty of the Eurosystem. While 
this risk may be very low at present, the ECB would need sufficient additional tools to react if 
it  were  to  materialise  anytime  in  the  future.  Classic  monetary  policy  tools  might  not  be 
sufficient to deal with these risks. 

Box B - Problems related to the legal tender status of cash 

The growth of electronic payments, a trend accelerated by COVID-19, and the attrition of the ATM 
networks has led to a general decline in cash payments and in the availability of cash (see annex 7). 
Thus,  the  issue  of  the  scope  and  meaning  of  the  legal  tender  status  of  cash  has  become  more 
prominent in the EU policy agenda, as outlined in the Commission’s Retail Payments Strategy and in 
view  of  the  recent  CJEU  ruling  on  the  matter.  This  ruling  is  significant  because  it  sets  out  in  the 
Court’s jurisprudence the key principles of legal tender, which until now have only been found in the 
2010 Commission Recommendation.  

Problems with acceptance of cash 
Although  EU  law  directly  attributes  the  status  of  legal  tender  to  euro  banknotes  and  coins,  neither 
primary nor secondary EU law defines the concept of legal tender. In 2010, the Commission issued a 
recommendation outlining a definition of the concept of legal tender. The Court of Justice confirmed 
the Commission’s definition in the Häring judgment of 26 January 2021 pointing out, however, that 
the concept of legal tender is not absolute. Given that, the 2010 Recommendation is a non-binding act 
that has not been widely followed, legal uncertainty will remain in the euro area concerning the scope 
of legal tender for euro cash. Moreover, revising this Recommendation would be unlikely to result in 
a common application and interpretation of legal tender principles, whilst the continued fragmentation 
of the situation across the euro area would not be coherent with the EU’s exclusive competence for 
monetary policy and its decision to opt for a regulation of legal tender of the digital euro. This is also 
confirmed by the outcome of the ELTEG III discussions, where Member States identified a range of 
issues  related  to acceptance  and  availability  of  cash leading  to legal  uncertainty  regarding  the  legal 
tender  of  euro  cash.  In  this  context,  there  was  broad  support  from  ELTEG  and  the  targeted 
stakeholder  consultation  that  if  the  EU  were  to  regulate  the  legal  tender  of  the  digital  euro  in 
secondary legislation, it should do the same for the legal tender of cash by codifying and clarifying 
the  case  law  of  the  Court  of  Justice  of  the  European  Union  on  the  key  principles  of  legal  tender. 
Regarding cash acceptance, several Member States reported an increase in the number of retailers not 
accepting cash. In the Netherlands, for example, whereas 96% of physical retailers still accepted cash 

40 Source: ECB, https://www.ecb.europa.eu/press/key/date/2021/html/ecb.sp211105~08781cb638.en.html 

14 

 
 
                                                           
in  2020,  9%  of  physical  retailers  indicate  that  they  expect  not  to  accept  cash  in  5  years’  time. 
Furthermore,  non-acceptance  is  already  more  prevalent  in  the  entertainment  (6%),  hospitality  (5%) 
and retail pharmacy sectors (10%)41. The 2022 ECB SPACE study confirms a generally high level of 
euro  area  wide  cash  acceptance  for  now,  but  the  start  of  a  declining  trend  in  acceptance  in  most 
Member States can be seen42. In fact, the euro area average masks the fact that some Member States 
seem to have experienced a more significant decline in cash acceptance between 2019 and 2022, with 
six Member States reporting a percentage point decrease of 5 points or higher, including two Member 
states  reporting  a  9  percentage  point  decrease43.  This  points  to  a  situation  where  limited  or 
circumstantial  private  restrictions  on  cash  payments  could  evolve,  because  of  their  volume,  into 
structural restrictions or exclusions of cash acceptance. This negatively affects the ability for cash to 
be used as an effective means of payment.  

Problems with access to cash 
In order to preserve the legal tender status of cash and to maintain its effective application in practice, 
it is key to ensure the ease of access to euro cash, because if citizens do not have access to cash they 
will not be able to pay with it and its effective legal tender status will be undermined. In order for cash 
to  be used  as an  effective  means  of  payment,  access to  various  cash services should  be  ensured,  in 
particular  cash  withdrawals  and  cash  deposits.  These  services  enable  cash  to  circulate  between 
different  actors  in  society.  By  extension,  the  willingness  and  ability  of  retailers  to  accept  cash  is 
directly linked to the consumers’ use of cash as a payment means. This in turn requires consumers to 
be able to make cash withdrawals from their accounts with the institutions, whilst it is also necessary 
for  retailers  to  be  able  to  access  deposit  services  in  order  to  convert  cash  into  funds  held  by 
institutions. It is through this system of withdrawals and deposits of the institutions that cash is mainly 
circulating in society. 
The  number  of  ATMs  in  Europe  as  a  whole  has  been  decreasing  steadily  since  2016,  from  an 
estimated  420.200  in 2016  to  367.941  in 2022.44  Looking  at  the  Euro  Area specifically,  the  overall 
number  of  cash  access  points  is  starting  to  show  decreasing  trends,  although  trends  vary  across 
Member  States,  pointing  to  a  heterogeneous  situation  on  the  ground.  Although  there  seems  to  be  a 
clear declining trend in the number of bank branches per 100,000 inhabitants on average in the euro 
area, this is partially offset by the number of ATMs per 100,000 inhabitants in some countries that are 
resisting  a  downsizing  of  their  ATM  network  (e.g.  Germany)  or  even  increasing  it  (e.g.  Italy  and 
Austria).45  On  the  other  hand,  some  Member  States  like  the  Netherlands  and  Belgium  are  clear 
examples of reductions in both bank branches and ATMs, which are projected to continue in the near 
future. For example, in Belgium, the number of ATMs is expected to decrease from 6912 (in 2020) to 
4037 (in 2025).46  The ECB study on the payment attitudes of consumers in the euro area (SPACE) 
shows  a  doubling  of  the  people  that  expressed  concerns  about  access  to  cash  withdrawals  between 
2016 (when only 5% of the people in euro area were not satisfied with access to  cash withdrawals) 
and  2022  (when  10%  considered  that  access  to  cash  withdrawals  is  fairly  or  very  difficult).47  A 
country-level  breakdown  demonstrates  a  significant  decline  in  perceived  access  to  cash  in  five 
Member States from 2019 to 2022, with in particular consumers in Belgium, (27% up from 15%), the 

41 See the final report under the 5th meeting of ELTEG III. 
42 ECB, Study on the payment attitudes of consumers in the euro area (SPACE) – 2022 – Consumer access to and acceptance of means of 
payment, p57. 
43 LV, FI, BE, MT, IE and EE reported a percentage point decrease of 5 points or higher in the change in the share of POS transactions 
where cash would be accepted. Most significantly, LV reports a decrease from 93% to 84% in acceptance, and FI from 94% to 85%, see 
ECB, Study on the payment attitudes of consumers in the euro area (SPACE) – 2022 – Consumer access to and acceptance of means of 
payment, p57. 
44 European Association for Secure Transactions (EAST) https://www.association-secure-transactions.eu/industry-information/atm-
numbers-europe/#:~:text=The%20chart%20below%20shows%20the,decrease%20from%20the%202021%20total. 
45 ‘’Guaranteeing freedom of payment choice: access to cash in the euro area’’, Alejandro Zamora-Pérez, Published as part of the ECB 
Economic Bulletin, Issue 5/2022. 
46 PARLEMENT DE LA RÉGION DE BRUXELLES-CAPITALE PROPOSITION DE RÉSOLUTION demandant une juste répartition des 
distributeurs de billets au sein de la Région de Bruxelles-Capitale;  images.pdf (irisnet.be) 
47 European Central Bank (2022), Study on the payment attitudes of consumers in the euro area (SPACE) 
https://www.ecb.europa.eu/stats/ecb_surveys/space/html/ecb.spacereport202212~783ffdf46e.en.html#toc7 

15 

 
 
 
                                                           
Netherlands  (19%  up  from  11%)  and  Luxembourg  (14%  up  from  7%)  reporting  a  significant 
decline.48 In five Member States (Belgium, the Netherlands, Spain, Greece and Malta), access to cash 
is deemed fairly or very difficult by over 15% of the respondents to the study. Furthermore, the flash 
Eurobarometer49 published in October 2022 shows that up to 13% of the citizens find it difficult to 
withdraw  cash  at  ATMs  or  physical  bank  branches.  These  findings  confirm  the  outcome  of  the 
ELTEG  III  meetings,  which  also  points  to  a  rather  heterogeneous  and  sometimes  problematic 
situation regarding cash access amongst the Member States.50 The share of the population covered by 
cash  access  points  is  uneven  across  countries,  with  the  share  of  people  living  within  5  km  of  the 
nearest cash access point ranging from 77% in the country with the lowest coverage to 100% in the 
country with highest coverage.51 Cash access seems to remain strongest in those Member States which 
are  already  cash  intensive,  whilst  others  point  to  a  gradual  but  structural  deterioration  of  access, 
reflected  in  various  issues  such  as  the  reduction  of  the  ATM  infrastructure  and  the  imposition  of 
withdrawal fees. As a result, there is a risk that it will not be possible to ensure that everyone in the 
euro area has access to basic cash services at a reasonable price and distance. This could lead to the 
exclusion of vulnerable groups with a dependency on cash payments, and to the erosion and gradual 
loss of the status of cash as meaningful and effective legal tender, but also as a possible contingency 
payment method in crisis situations. The 2022 ECB SPACE study confirms that older age groups (i.e. 
those over 55) tend to use cash relatively more often than younger generations and the share of cash 
payments  also increases  as  the level of  education  and  income  decreases.52  For  example,  the  highest 
earning group of respondents paid just above half of its point-of-service transactions with cash, while 
the  lowest  income  group  paid  two-thirds.  This  implies  that  these  groups  are  more  at  risk  of  losing 
their access to effective payment methods if their access to cash deteriorates.  Moreover, it should be 
noted that cash is seen by many as a payment method with social benefits, providing a clear overview 
of expenses, with high degrees of ease of use, speed, safety and anonymity. Indeed, the ECB SPACE 
study of 2022 confirms that the main reasons why cash is preferred are that (i) cash is considered to 
make one more aware of one’s own expenses, and (ii) cash is perceived as anonymous (and therefore 
protects privacy).53 The study also shows that in terms of preserving cash as a payment option, 60% of 
consumers still considered the option to pay with cash to be important or very important. It confirms 
that  ‘‘despite  the  impact  of  the  pandemic  and  related  lockdown  measures  and  self-reported 
preferences,  an  increasing  share  of  euro  area  consumers  would  like  to  have  cash  as  a  payment 
option’’.54 

2.2 

Drivers 

Driver 1: In a rapidly digitalizing economy, central bank money (currently only cash) is 
not available for payments in a growing part of the economy.  

People still use cash in most of their  everyday transactions, but trends  seem to show a 
shift  towards  electronic  payments.  According  to  the  ECB’s  2022  SPACE  study  on  the 
payment attitudes of consumers in the euro area,55 consumers still predominantly use cash for 
Point-of-Sale  (POS)  and  Person-to-person  (P2P)  payments,  but  its  share  seems  to  be 
declining  especially  after  the  pandemic.  In  2022,  the  share  of  cash  payments  in  the  total 

48 Access to cash is perceived to be stable from 2019 to 2022 in 4 Member States, and to have increased in nine Member States. 
49 https://europa.eu/eurobarometer/surveys/detail/2666 
50 The Commission has convened three times an expert group of Member States’ representatives (ELTEG I, II and III). ELTEG III published 
its final report in July 2022. 
51 https://www.ecb.europa.eu/pub/economic-bulletin/articles/2022/html/ecb.ebart202205_02~74b1fc0841.en.html 
52 European Central Bank (2022), Study on the payment attitudes of consumers in the euro area (SPACE) 
https://www.ecb.europa.eu/stats/ecb_surveys/space/html/ecb.spacereport202212~783ffdf46e.en.html#toc7 
53European Central Bank (2022), Study on the payment attitudes of consumers in the euro area (SPACE) 
https://www.ecb.europa.eu/stats/ecb_surveys/space/html/ecb.spacereport202212~783ffdf46e.en.html#toc7 
54 European Central Bank (2022), Study on the payment attitudes of consumers in the euro area (SPACE), p59 
https://www.ecb.europa.eu/stats/ecb_surveys/space/html/ecb.spacereport202212~783ffdf46e.en.html#toc7 
55 European Central Bank (2022), Study on the payment attitudes of consumers in the euro area 
(SPACE)https://www.ecb.europa.eu/stats/ecb_surveys/space/html/ecb.spacereport202212~783ffdf46e.en.html#toc7 

16 

 
 
                                                           
number of POS retail payment transactions went down to 59% from 72% in 2019 and 79% in 
2016. In two euro area countries, cash usage at POS has now decreased to 20%. In terms of 
value,  the  share  of  card  transactions  in  2022  (46%)  was  higher  than  the  share  of  cash 
transactions (42%) for the first time. In 2019 the share of cash transactions by value was 47% 
and  the  equivalent  share  of  card  transactions  43%.  Already  before  the  pandemic  in  2019 
nearly half (49%) of consumers explicitly stated their preference for cards or other cashless 
payment  instruments.  In  2022,  this  went  up  to  55%.  Online  payments  have  become  more 
frequent  in  comparison  to  POS  and  P2P  across  the  euro  area.  SPACE  2022  shows  that  the 
share  of  online  payments  in  consumer’s  non-recurring  payments  (that  is  payments  that 
exclude regular bill payments such as electricity bills or rent) increased from 6% in 2019 to 
17%  in  2022.  The  number  of  POS  terminals  also  significantly  increased  in  the  European 
Union  from  10.4  million  in  2016  to  16.1  million  in  2021.  Yet,  significant  differences  exist 
across countries, with the proportion of cash in relation to the total number of payments at the 
point  of  sale  varying  from  77%  in  Malta,  73%  in  Slovenia  and  70%  in  Austria  to  39%  in 
Luxembourg, 21% in the Netherlands and 19% in Finland. Compared to 2019, the number of 
cash payments decreased the most in Cyprus (-23 percentage points (p.p.)), Greece (-18 p.p.), 
Spain (-18 p.p.), and Portugal (-17 p.p.). For more information on the use of cash, please see 
Annex 6.  

E-commerce has accelerated the increase in the use of electronic payments.  In the past 
decades,  e-commerce  has  increased  quickly  and  accelerated  during  the  pandemic  period. 
According to Eurostat, the share of EU households with internet access has risen to 92%56 in 
2021 from 72% a decade earlier. In 2021 in the EU, 74% of the internet users shopped online 
compared to 54% in 2011. The COVID-19 pandemic has accelerated the shift toward digital 
payments57, largely  due to  increased e-commerce.  In the ECB’s  SPACE  survey, consumers 
reported  increased  online  shopping  during  the  pandemic  as  online  payments  have  become 
more frequent in comparison to POS and P2P across the euro area. In 2022, at least 10% of 
all  non-recurring  transactions  were  online  payments  in  every  euro  area  country.  This  is  a 
notable  change,  given  that  online  payments  accounted  for  less  than  5%  of  non-recurring 
payments  in  Malta,  Cyprus  and  Germany  in  2019.  In  several  countries  the  share  of  online 
payments  in  2022  was  over  20%,  the  highest  values  being  reported  in  Belgium  (24%), 
Austria  and  Ireland  (both  21%)  and  France  (20%).  Online  payments  were  more  frequently 
made for larger-value purchases. The share of online payments was higher in terms of value 
than  number.  The  highest  shares  of  online  payments  by  value  were  reported  in  Slovenia 
(40%),  Finland  (37%),  Belgium  (36%)  and  Austria  (35%).  With  the  fast  increase  in  e-
commerce,  online  payments  are  expected  to  play  an  even  greater  role  in  tomorrow’s 
consumer payment habits at the expense of cash payments. European e-commerce revenue is 
forecasted to double by 2025, from EUR 600 billion in 2020 to an estimated EUR 1.2 trillion 
in 2025.58 In addition, European businesses are expected to increase the share of their online 
sales to 22.3% in 2025 compared to 13.7% in 2020. Card payments were used in 34% of POS 
transactions in 2022, up from 19% in 2016 and 25% in 2019. 

Driver 2: Third country CBDCs and stablecoins not denominated in euro could reduce 
the role of the euro in the European retail payment markets 

56 Eurostat(2021),  “https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Digital_economy_and_society_statistics_-
_households_and_individuals”  
57 Bank of International Settlements (2021), “Covid-19 accelerated the digitalisation of payments and Auer, Raphael, Cornelli, Giulio and 
Frost, Jon, (2020), “Covid-19, cash, and the future of payments”, No 3, BIS Bulletins, Bank for International Settlements. 
58 Statista (2021), eCommerce - Europe  

17 

 
 
                                                           
Foreign  CBDCs  may  challenge  the  use  of  the  euro  both  in  the  euro  area  and 
internationally  (see  also  Annex  10).  Many  central  banks  around  the  world  are  currently 
exploring the issuance of central bank digital currencies and a growing number of countries 
have  already  issued  a  CBDC.  In  February  2022,  the  International  Monetary  Fund  (IMF)59 
estimated  that  around  100  countries  around  the  world  are  exploring  CBDC’s  at  various 
stages.60 A survey61 conducted by the Bank of International Settlements (BIS)62 found that by 
late 2021 the share of central banks actively engaged in some form of CBDC work had grown 
to  90%.  Besides  domestic  efforts,  international  collaboration  between  countries  also  takes 
place  to  explore  cross  border  developments  for  CBDC.  According  to  the  Atlantic  Council 
Research,  nine  countries  (Nigeria,  the  Bahamas  and  seven  East  Caribbean  countries)  have 
already launched a CBDC, and a dozen of countries are in the pilot phase.63 China’s e-CNY 
is among the latest to have rolled out its pilot phase, having registered at the end of December 
2021 already more than 260 million users with a strong growth. In the EU, Sweden appears to 
be the furthest ahead in terms of concrete experimentations with the e-krona pilot project.64 
While the first issued CBDCs and projects indicate a strong focus on domestic use cases, at 
least in first instance, their international use is technically possible and could be targeted at 
later  stages.65  In  its  public  consultation  on  a  digital  dollar  of  20  January  2022,  the  United 
States Federal Reserve outlines the potential need to preserve the dominant international role 
of  the  U.S.  dollar  in  support  of  a  US-issued  CBDC.66  The  US  President  executive  order 
points  to  the  need  to  assess  “the  extent  to  which  foreign  CBDC  could  displace  existing 
currencies  and  alter  the  payment  system  in  ways  that  could  undermine  the  United  States 
financial  centrality”.67  Though  the  overall  risk  from  third  country  CBDCs  pertains  to 
developments in the future and is thus difficult to reliably quantify, the G7 principles on retail 
CBDC  insist  on  the  need  to  restrict  the  use  of  CBDC  to  safeguard  financial  stability  and 
monetary sovereignty of other jurisdictions, implying that this risk is recognised by the G7 as 
credible. For more information on third country CBDCs please see Annex 10. 

So called “Global stablecoins”68 not denominated in euro and operating on Distributed 
Ledger Technology with smart contracts could  reduce euro denominated payments by 
satisfying demand for “conditional payments” such as in e-commerce (“metaverse” use 
cases),  mobility,  capital  markets  or  industry  4.0  (for  details  see  Annex  8).  With  the 
increasing digitalisation of the global economy, crypto assets of various kind have emerged. 
Common to all forms of crypto assets is their ability to support “conditional payments” with 
“smart  contracts”  on  Distributed  Ledgers.  “Stablecoins”  –  contrary  to  crypto  assets  like 
Bitcoin – which purport to maintain a stable value, are relatively stable in value and can serve 
as a means of payment. The disruptive potential of “global stablecoins” depends on several 
variables, amongst others on the sustainable and durable development of digital markets that 
operate with digital assets, and on the availability of central bank alternatives such as CBDC. 
As set out in Annex 8, among the potential future markets  for stable coins are “conditional 

of 

the 

–  Results 

2021  BIS 

59 The International Monetary Fund promotes international financial stability and monetary cooperation. It also facilitates international trade, 
promotes employment and sustainable economic growth, and it helps reduce global poverty. 
60 The Future of Money: Gearing up for Central Bank Digital Currency 
61  Gaining  momentum 
https://www.bis.org/publ/bppdf/bispap125.pdf 
62 The Bank of International Settlements is an international financial institution owned by central banks that fosters international money and 
financial cooperation and serves as a bank for central banks.  
63 Atlantic Council, Central Bank Digital Currency Tracker 
64 E-krona | Sveriges Riksbank 
65 Report on a digital euro, ECB, October 2020 
66 Federal Reserve Board  - Federal Reserve Board releases discussion paper that examines pros and cons of a potential U.S. central bank 
digital currency (CBDC) 
67 Executive order on ensuring responsible development of digital asset, 9 March 2022.  
68 The Markets in Crytpo Assets Regulation refers to stablecoins either as asset referenced crypto asset or e-money token. In this Impact 
Assessment, use the non-legal term of stablecoin is used as umbrella term that captures both types of crypto assets with stable value.  

currencies. 

central 

survey 

digital 

bank 

See 

on 

18 

 
 
                                                           
payments” between machines (M2M payments) in manufacturing, mobility and energy. M2M 
payments  could  also  be  used  in  a  number  of  industrial  applications  such  as  automatic 
recharging  of  cars,  automatic  order  of  supply  for  manufacturing,  logistical  services, 
deliveries. M2M transactions can increase efficiency by facilitating the roll-out of internet-of-
things infrastructures and cutting cost in securities trading. The development of web 3 and a 
future metaverse would almost require a “stablecoin” or a CBDC for “conditional payments”.  

So called “Global stablecoins” not denominated in euro may gain market share not only 
in  global  remittance  payments  but  also  in  local  payments.  Facebook/Meta’s  private 
tokenized money project Libra/Diem was advertised as the first crypto-asset/stablecoin with a 
potential to challenge central bank issued currencies in all three functions of money: means of 
payment,  store  of  value  and  even  unit  of  account.  The  project  constituted  a  major  turning 
point in central banks’ attitude towards CBDCs, which were seen as a potential response to 
such  challenges.  According  to  ECB  simulations,69  Libra/Diem  could  have  been  a  global 
stablecoin  leveraging  Facebook/Meta’s  user  network  and  whose  assets  under  management 
could have ranged from EUR 152.7 billion in a ‘means of payment’ scenario to around EUR 
3 trillion in the most extreme ‘store of value’ scenario. Comparatively, there were  EUR 1.5 
trillion  banknotes  in  circulation  in  February  2022.  While  Facebook/Meta  eventually 
abandoned its project, similar “global stablecoin” projects could appear in the future.70  

69 European Central Bank (2020), A regulatory and financial stability perspective on global stablecoins.  
70 Stablecoins have a substantial market capitalization: about USD 150 billion at end September 2022, source: 
https://coinmarketcap.com/view/stablecoin/ 

19 

 
 
 
 
                                                           
2.3 

Consequences 

2.3.1 

For the People 

1.  Limited choices in pan-European payments 

Lacking  central  bank  digital  money  for  people  to  business  payments  (POS  and  e-
commerce) may perpetuate the limited choice for people on the pan-European payment 
market,  thereby  increasing  the  costs  for  goods  and  services.  Currently  cash  use  overall 
seems to be in decline and payers more and more use electronic payments. At the same time, 
international card schemes (ICS) represent a large majority of the EU’s electronic payments 
market for retail payments in physical shops and e-commerce (both for domestic transactions 
in a majority of EU countries, but also in particular for cross-border payments). According to 
the  ECB,71  at  the  end  of  2016,  the  share  of  transactions  processed  by  international  card 
schemes for payment cards issued in the EU was 67.5%. The competitiveness of this market, 
which relies on few operators for cross-border transactions in particular, could be improved 
as a result of the introduction of additional offers. Such offers exist to some extent in nine EU 
Member States  (BE,  BU, DK, DE,  FR, PT, MT,  IT, SI), where domestic schemes compete 
with  ICS,  while  they  are  dependent  on  ICSs  for  payments  across  Member  States.  These 
European domestic card schemes work, however, only within the borders of a single Member 
State,72  while  the  cross-border  EU  retail  electronic  payments  in  physical  shops  are  largely 
served by ICS or large, often foreign-owned platforms offering digital wallets to cardholders 
through which they  can  initiate a  payment transaction which is  often card-based. The same 
goes for e-commerce, where both ICS and large platforms dominate the market. The role of a 
few  operators  for  cross-border  transactions  can  be  expected  to  grow  further  as  consumer 
preferences  change  towards  electronic  payments  and  e-commerce,  with  possible  negative 
implications  also  for  the  EU’s  open  strategic  autonomy  in  payments.  Analogously,  the 
concentration  of  the  market  can  be  expected  to  grow  further  also  in  non-e-commerce 
payments with negative implications such as higher fees which drive up the cost of goods and 
services for individuals.   

Lacking  central  bank  digital  money  also  leads  to  limited  choices  for  people  in  future 
developments of electronic communication such as the new web 3 applications, where users 
may have to  rely on private alternatives to  central  bank money (i.e. stablecoins) or CBDCs 
from third countries.  

2.  Financial inclusion may be eroded 

Cash  plays  an  important  role  for  the  financially  excluded,  which  may  not  be  able  or 
willing  to  use  means  of  payment  supplied  by  the  private  sector.  The  reasons  for  being 
financially excluded may vary, but often include one or all of the following elements: in the 
absence of documentation, intermediaries are unwilling to bear AML/CFT compliance risks; 
cost  of  maintaining  an  account/using  a  payment  instrument,  financial  illiteracy,  or  lack  of 
trust in the financial sector.  

Financial exclusion in the digitalised society may increase as most private digital means 
of payments do not specifically cater for vulnerable groups of the society, may become 
too expensive and are not suitable in some rural or remote areas. Vulnerable groups (e.g. 
unbanked,  over-indebted,  minors  and  other  individuals  depending  on  legal  guardians, 

71 European Central Bank, Card payments in Europe – current landscape and future prospects: a Eurosystem perspective  
72 With a few limited exceptions. 

20 

 
 
                                                           
financially or digitally illiterate, as well as persons with certain disabilities and those living in 
rural  areas) may not be skilled enough or able to access  an account to use digital means of 
payments in the digitalised economy, where cash has limited use. In addition, missing internet 
infrastructure or digital  skills  could  make online payments  unusable in  some  rural  areas.  In 
2021,  about  8%  of  EU  households  had  no  internet  access  and  an  estimated  13.5  million 
citizens in the euro area live without a payment account.73 Moreover, in 2021, only 60% of 
EU rural households have high-speed internet access, compared to the EU’s total average of 
92% and only 48% of rural residents have at least basic digital skills, compared to 62% of the 
urban population.74This  could  lead to  situations  where online payments  cannot  be used and 
transactions can thus not be settled.  

According to the World Bank and the BIS, “efficient, accessible and safe retail payment 
systems  and  services  are  critical  for  greater  financial  inclusion”.75  This  finding  was 
further  substantiated  by  the  study  on  new  Digital  Payment  Methods  commissioned  by  the 
ECB,  which  concluded  that  for  the  unbanked/underbanked/offline  population,  the  most 
important features of a new payment method are easiness of use, not requiring technological 
skills, and to be secure and free of charge.76 Simple offline electronic payments could offer a 
solution  for  the  vulnerable  groups.  Given  the  low  profitability  of  this  market,  the  private 
sector has not delivered such products at a wide scale.  

2.3.2  For Businesses 

Merchants  have  limited  choices  when  accepting  electronic  payments  (PoS  and  e-
commerce).  Presently  merchants  as  well  as  corporate  users  have  little  choice  but  to  accept 
the  handful  of  ICS  and  platforms  integrating  these  ICS  to  serve  customers  from  across  the 
EU, in particular cross-border. All responses of merchants to the Commission’s open public 
consultation  on  instant  payments  stated  that  ensuring  the  ability  to  accept  payments  from 
customers  from  other  Member  States  was  very  important.  This  situation  would  vary 
depending  on  the  existence  of  alternative  domestic  card  schemes  or  account-to-account 
payment solutions (e.g. via QR codes), and on the size of the merchant and the retail sector 
considered.  This  could  also  change  with  the  development  of  instant  payment  solutions  in 
shops  and  e-commerce  offered  by  the  private  sector,  which  will  be  supported  by  the 
Commission’s instant payments initiative.77 A digital euro available across Member States for 
payments  in  shops  and  e-commerce  would  provide  an  important  additional  choice  for  both 
merchants and corporate users. 

Innovative  businesses  could  face  potential  loss  of  competitiveness  due  to  higher  risks 
(credit,  forex,  political)  or  higher  cost  when  relying  on  innovative  payment  solutions 
(e.g.  conditional  payments)  provided  by  foreign  CBDCs  or  “stablecoins”.  Lacking  a 
central  bank  issued  euro  denominated  CBDC  that  supports  innovative  payment  solutions 
including  conditional  payments  may  put  the  euro  area  economy  at  a  competitive 
disadvantage.  In the absence of such a euro denominated CBDC, innovative EU businesses 
may  need  to  rely  on  private  “stablecoins”,  or  foreign  CBDCs  exposing  them  to  market 
stability risks, currency conversion risks and/or a loss of control over their data. In addition, 

73 https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Digital_economy_and_society_statistics_-_households_and_individuals 
https://www.ecb.europa.eu/pub/economic-bulletin/articles/2022/html/ecb.ebart202205_02~74b1fc0841.en.html 
74 Source: Eurobarometer, https://digital-strategy.ec.europa.eu/en/news/connectivity-key-revitalising-rural-areas 
75 https://documents1.worldbank.org/curated/en/806481470154477031/pdf/Payment-Aspects-of-Financial-Inclusion.pdf 
76 Study on New Digital Payment Methods (europa.eu), March 2022. According to the World Bank, financial inclusion means that 
individuals have access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, 
credit and insurance”.  
77 https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12931-Instant-payments_en 

21 

 
 
                                                           
businesses may refrain from innovation if they need to bear too many risks when using non-
central bank issued money for conditional payments.  

2.3.3 

For the Eurosystem and the EU’s economy 

1.  Weakened monetary anchor  

As users seem to shift away from cash towards digital payments, central bank money is 
less and less able to act as an “anchor” for commercial bank money, i.e. bank deposits, 
which  is  at  the  core  of  our  monetary  and  financial  system.  Today,  the  acceptability  of 
private means of payment – like bank deposits in commercial bank money – relies on its one-
to-one convertibility to central bank money. This convertibility at par between private money 
and the safest form of money in the economy – central bank money, the monetary anchor – 
underpins  people’s  confidence  in  private  money  and  other  regulated  forms  of  money.78 
Central  bank  money  is  the  only  money  whose  face  value  is  intrinsically  guaranteed  by  the 
central  bank.  In  contrast,  private  money  is  not  exempted  from  operational,  credit,  liquidity 
and  market  risks.  The  risks  are  reduced  through  public  policy  safeguards,  such  as  financial 
supervision,  prudential  requirements  and  deposit  insurance.  The  fact  that  central  banks 
commit  to  issuing  cash  does  not  necessarily  mean  that  demand  for  cash  will  continue  to 
remain at current high levels, as in the ongoing shift towards in electronic payments – based 
on commercial bank money – is expected to continue. As a result, the trust in the currency – 
the  euro  –  may  become  dependent  on  the  trust  in  financial  intermediaries  issuing  and 
managing commercial bank money. 

In an evolving digital age, a growing share of payments may be settled more effectively 
through digital means. The potential resulting declining relevance of euro-cash, driven 
by its declining use, would also weaken the effectiveness of legal tender for cash users. 
The  mandatory  acceptance  linked  to  the  legal  tender  status  of  euro  cash  implies  that  a 
creditor/payee cannot generally refuse a payment by a debtor in euro cash. However, cash is 
not always accessible and/or useable in the digitalised economy, which necessitates (instant 
and innovative)  electronic payments79. Hence,  the  limitation  of central  bank money  to  cash 
impairs to a significant extent the general ability for payers to settle their monetary debts in 
an official form of the euro. 

2.  Potential impacts on monetary policy 

Wide use of third country CBDCs and non-euro denominated “stablecoins” would limit 
the transmission of monetary policy and monetary sovereignty. According to the ECB,80 
“stablecoins”  if  they  are  widespread  and  assume  a  “store  of  value”  function  could  have 
consequences  for  the  transmission  of  monetary  policy  through  various  channels.  The 
Eurosystem would face similar challenges in case a foreign CBDC gains hypothetically large-
scale adoption in  the euro area. However, for internal  market  participants  to  switch to  non-
euro denominated means of payment on  a large scale, these payment means would need to 
provide  tangible  added  value  to  both  sides  of  the  market.  Currently,  the  risk  of  currency 
substitution can be considered very low in the euro area and mainly a matter of concern for 
emerging  economies  with  less  stable  currencies.  Nonetheless,  emerging  digital  means  of 

78 European Central Bank (2021), Central bank digital currencies: a monetary anchor for digital innovation, Fabio Panetta, November 2021 
79 The ECB’s Cash2030 Strategy aims at ensuring that cash remains widely available and accepted as means of payment and a store of 
value, https://www.ecb.europa.eu/euro/cash_strategy/html/index.en.html  
80 European Central Bank (2020), Crypto Assets Task Force, Stablecoins:  Implications for monetary policy, financial stability, market 
infrastructure and payments, and banking supervision in the euro area.  

22 

 
 
                                                           
payment make such currency substitution significantly easier. A potential increase in foreign 
currency debt or -trade invoicing would imply that the euro area would be more exposed to 
foreign  monetary  policy  spillovers  and  conversely  making  domestic  monetary  policy  less 
effective.  

3.  Financial stability risks 

A  widespread  adoption  of  “stablecoins”  and  foreign  CBDCs  would  raise  certain 
financial stability concerns. First, “stablecoins” widely used as a means of payment may be 
a source of instability, depending on their pegging mechanism and interconnectedness  with 
the  financial  system.  That  is,  just  as  banks,  issuers  of  “stablecoins”  could  be  subject  to 
liquidity  runs,  a  risk  mitigated  but  not  fully  excluded  by  the  recently  agreed  Markets  in 
Crypto  Assets  (MiCA)  Regulation.81  Potentially  resulting  contagion  effects  could  amplify 
and  propagate  shocks.  Second,  if  the  emergence  of  foreign-denominated  digital  payment 
means lead to an increase in foreign currency debt or -trade invoicing, exchange rate swings 
could induce strong effects on domestic financial markets. 

4.  Weakening international role of the euro 

The  emergence  of  foreign-denominated  “stablecoins”  and  foreign  CBDCs  could 
negatively  affect  the  euro’s  international  role,  if  those  means  of  payment  reduce  the 
share of the euro in cross-border payments, in trade invoicing, in terms of denomination 
of debt issuances or as a reserve currency. Foreign-denominated stablecoins hold potential 
in  cross-border  payments  as  well  as  for  future  metaverse  applications,  if  these  stablecoins 
provide  for  significant  added  value  in  terms  of  transaction  speed  and  costs.  Similarly,  and 
irrespective of their use within the euro area, the issuance of CBDCs by major foreign central 
banks  may  enhance  the  international  status  of  their  respective  currencies  and  provide  a 
competitive  advantage  to  the  industries  of  their  respective  jurisdictions,  possibly  to  the 
detriment  of the  euro82. Furthermore, depending on their respective design, foreign CBDCs 
could facilitate trade invoicing in their respective currency at the expense of the euro, a risk 
that is especially prevalent in small economies in the euro area neighbourhood. Reduced trade 
invoicing  in  euro  makes  euro  area  businesses  more  vulnerable  to  foreign  exchange  rate 
shocks  or  increases  their  hedging  costs  and  may  increase  funding  costs  on  international 
capital markets. 

A  weaker  international  role  of  the  euro  in  turn  implies  negative  consequences  for  the 
euro area economy at large. The December 2018 Commission communication “Towards a 
stronger international role of the euro” identified a number of benefits of an international use 
of the euro.83.  

5.  Weakened open strategic autonomy of the EU 

81 Regulation providing a regulatory framework for crypto-assets and stablecoins and their service providers in the EU (i.e. single licensing 
regime). It covers ‘asset-referenced token’ and “e-money token”. Asset-referenced token is a type of crypto-asset that purports to maintain a 
stable value by referring to the value of several fiat currencies that are legal tender, one or several commodities or one or several crypto-
assets, or a combination of such asset. Electronic money token’ is a type of crypto-asset the main purpose of which is to be used as a means 
of exchange and that purports to maintain a stable value by referring to the value of a fiat currency that is legal tender. 
82  Ferrari,  Massimo  &  Mehl,  Arnaud  &  Stracca,  Livio,  2020.  "Central  bank  digital  currency  in  an  open  economy," Working  Paper 
Series 2488, European Central Bank. 
83  This  includes  lower  cost  and  lower  risk  of  trading  internationally  for  European  businesses.  Trading  in  euro  rather  than  in  a  foreign 
currency; additional choice for market operators across the globe; stronger autonomy of European consumers and businesses, allowing them 
to pay or receive payments for their international trade, and finance themselves with reduced exposure to legal actions taken by third country 
jurisdictions,  like  extraterritorial  sanctions  and  improved  resilience  of  the  international  financial  system  and  economy,  making  them  less 
vulnerable to exchange rate shocks. 

23 

 
 
                                                           
Europe’s open strategic autonomy in payments could be weakened if businesses have to 
rely  on  third  country  solutions  to  meet  their  need  for  advanced  payment  solutions. 
Europe’s digital economy may see a growing demand for conditional payments and demand 
by  businesses  for  a  means  of  payment  that  can  be  used  for  conditional  transactions.  At  the 
current juncture, and despite ongoing legislative initiatives, this is not guaranteed. As a result, 
businesses would have to rely on third country, private, advanced payment solutions, a trend 
that  could  further  weaken  Europe’s  open  strategic  autonomy  in  payments.  Absent  a  digital 
euro that allows for innovative payment use cases including conditional payments, Europe’s 
industrial  competitiveness  would  suffer  in  the  long  term.  Businesses  in  the  mobility  sector, 
capital  markets  or  industry  4.0  will  need  to  build  conditional  payments  as  automation 
accelerates.  They  may  then  have  no  alternative  but  to  build  advanced  conditional  payment 
functionalities on third country issued CBDCs or private solutions controlled by players from 
third countries. The ingression of third country issued CBDCs or foreign stable coins could 
then also lead to a “dollar-isation” or “yuan-isation” of e-commerce (“metaverse” use cases). 

2.4  How will this problem evolve without further action 

Without  further  action,  the  trends  described  above  are  expected  to  continue,  and  the 
forms  of  money  issued  by  the  Eurosystem  (banknotes  and  coins)  do  not  sufficiently 
reflect the needs in the digital age. In the absence of a digital euro/retail CBDC in the euro 
area, an excessive decline in the availability and use of central bank money, together with a 
rapid  increase  in  remote  payments  where  cash  cannot  be  used,  pose  risks  to  monetary 
sovereignty and the singleness of the euro84 in the well-tested two-layer monetary system (i.e. 
central banks and commercial banks). Without such anchor in the digital age, confidence in 
the singleness of money and financial stability may erode. Furthermore, an excessive decline 
in the availability and use of central bank money in favour of private means of payments may 
pose risks to financial inclusion, although it is acknowledged that the Eurosystem’s Cash2030 
Strategy  aims  at  ensuring  that  cash  will  remain  accessible  and  accepted.  The  EU  payments 
market  may  remain,  to  a  significant  degree,  fragmented  along  national  borders,  as  most 
domestic  payment  solutions  based  on  cards  or  instant  payments  do  not  work  cross-border. 
When it comes to players that can – and do – serve the intra-European cross-border payments 
market there is only very limited choice. Without a choice to use central bank issued money 
in  payments,  there  is  a  risk  that  the  retail  payments  market  (for  in-shops  and  e-commerce) 
remains concentrated in the hands of only a few players. 

Existing  or planned  EU  initiatives will  partly  address  the  problem  but  not fully,  since 
they  can  regulate  only  payments  using  private  money.  SEPA  has  created  a  well-
functioning,  efficient  and  fast  pan-European  market  for  credit  transfers.  The  Commission’s 
instant  payment  initiative  should  create  favourable  conditions  for  instant-based,  pan-
European payment solutions to emerge and compete with the incumbents, but it will be up to 
the market to deliver competitive and viable pan-European payment solutions. To accelerate 
the rollout of instant payments in the EU, the Commission has adopted a legislative proposal 
in October 2022. The upcoming PSD2 Review can also reinforce a level playing field and a 
modern legal framework for state-of-the-art payment services. The digital euro, which will be 
distributed  by  intermediaries,  could  offer  the  opportunity  to  set-up  an  acceptance 

84  Article 133 of the TFEU (which would be used as the legal basis for the Regulation establishing the digital euro), highlights the need to 
lay down measures necessary for the use of the euro as the single currency. Based on this provision, it can be inferred that the singleness of 
the euro should be guaranteed and that fragmentation of the currency should generally be avoided. This is also confirmed by AG Pitruzzella 
in  its  Opinion  in  the  Hessischer  Rundfunk  case  in  relation  to  article  119(2)  TFEU:  «Furthermore,  the  reference  to  the  singleness  of  the 
currency contained in Article 119(2) TFEU presupposes the conferral on the Union of exclusive competence, which, to be able to guarantee 
this singleness, must include the power to govern the regulatory aspects of the currency itself, and must therefore include monetary law.» 
(See opinion of Advocate General Pitruzzella in Hessischer Rundfunk, C‑422/19 and C‑423/19, ECLI:EU:C:2020:756, § 60). 

24 

 
 
                                                           
infrastructure  that  can  also  support  private  pan-European  payment  solutions  through  a 
dedicated EU scheme. If this is the case, this may help private payment solutions to broaden 
their  acceptance  network.  In  the  absence  of  a  digital  euro  and  the  related  acceptance 
infrastructure, a pan-European payment solution might have more difficulties to emerge and 
have wide access to merchants.  

Without a credit risk-free solution and monetary anchor in innovative digital payments 
European  competitiveness  in  industry  4.0  and  web  385  can  erode  in  the  future.  Private 
actors  developing  applications  for  web  3  or  industry  4.0  would  rely  on  stablecoins  and 
foreign CBDC as a means for conditional payments, which would dominate the future of e-
commerce for immersive audio-visual experiences as well as machine to machine payments. 
This  indicated by the rapid  growth  of crypto-asset  markets  which  reveals society's  growing 
demand  for  digital  instruments,  even  though  crypto  assets  can  hardly  perform  a  currency’s 
three  functions:  means  of  payment,  store  of  value  and  unit  of  account.  Such  digital 
instruments  include  new  payments  products,  such  as  crypto-based  digital  money  and  other 
electronic money products. The Regulation on Markets in Crypto-Assets86 (MiCA), as well as 
a recast of the Transfer of Funds Regulation87 (TFR) will bring more legal certainty to this 
domain.  MiCA  is  intended  to  support  innovation  and  fair  competition  across  crypto-assets 
services  providers88  while  ensuring  a  high  level  of  consumer  and  investor  protection  and 
market  integrity  in  the  crypto-assets  markets.  TFR  aims  at  ensuring  full  traceability  of 
transfers  of  funds  and,  after  its  recast  as  part  of  the  AML  package,  full  traceability  of 
transfers  of  crypto-assets.  The  European  Commission  has  also  proposed  key  legislative 
initiatives  to  prepare  for  Europe’s  digital  future  by  increasing  competitiveness  for  all  the 
actors  in  the  Digital  Single  Market.  Built  on  the  strong  framework  of  the  General  Data 
Protection Regulation, policies to establish a harmonised framework for data sharing and data 
use include the Data Governance Act to make better use of publicly held data and to define 
the role of data intermediation services; the Data Act to setting general rules for business-to-
business data sharing across sectors.  

Though the EU has pioneered global regulation on crypto-assets and data, state-of-the 
art  regulation  is  not  a  sufficient  condition  to  ensure  the  integrity  and  stability  of  the 
financial  system  in  the  digital  age.  To  achieve  this  goal,  it  is  necessary  to  ensure  the 
continued  co-existence  of  private  and  public  money.  This  is  precisely  the  function  of  the 
digital euro, which would not be a crypto asset, but public digital money: a new form of the 
euro currency, backed by the central bank and its price stability mandate. Significant reliance 
on crypto-assets, stablecoins and foreign CBDCs is expected to pose intensifying competition 
to the euro, limit its international role,89 increase its sensitivity to foreign shocks,90 and limit 
the Eurosystem’s monetary autonomy.91 These risks of course depend on concrete use-cases 

85 See Annex 8 on the evolution of the internet and payment needs of industry 4.0. 
86  Proposal  for  a  Regulation  on  Markets  in  Crypto-assets,  and  amending  Directive  (EU)  2019/1937.  https://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=CELEX%3A52020PC0593.  Final  text  adopted  on  5  July  2022,  available  at  on  tokenised  e-money  or  on  foreign 
CBDCs, publication in Official Journal pending.  
87  Proposal  for  a  Regulation  on  information  accompanying  transfers  of  funds  and  certain  crypto-assets  (recast).  https://eur-
lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52021PC0422 
88  See  Commission  staff  working  document,  impact  assessment  accompanying  the  document  Proposal  for  a  Regulation  of  the  European 
Parliament  and  of  the  Council  on  Markets  in  Crypto-assets  and  amending  Directive  (EU)  2019/1937https://eur-lex.europa.eu/legal-
content/EN/TXT/PDF/?uri=CELEX:52020SC0380 
89  Third-country  issued  CBDCs  could  help  to  increase  the  role  of  their  unit  of  denomination  in  global  trade  payments,  if  designed  more 
competitively than existing means of payments to settle international transactions. In this scenario, a successful third-country issued CBDC 
would strengthen the international role of the currency of the issuing-country, increase its role as global invoicing and settlement units and 
lower funding costs in that currency.  Gopinath, G., Stein, J. C., 2018. "Banking, Trade, and the making of a Dominant Currency," NBER 
Working Papers 24485, National Bureau of Economic Research, Inc. 
90  Ferrari,  M.,  Mehl,  A.,  Stracca,  L.,  2022.  "Central  bank  digital  currency  in  an  open  economy,"  Journal  of  Monetary  Economics, 
forthcoming. 
91 The ECB might need to react more strongly to shocks to stabilize the euro area business cycle, thereby limiting monetary policy autonomy 

25 

 
 
                                                           
and on the issuance and usage of non-euro denominated CBDCs and stablecoins. Eventually, 
this would reduce the competitiveness of EU businesses compared to countries with locally 
denominated CBDCs that are able to support innovative payment needs. 

Box C – How the problems related to the legal tender status of cash  could evolve without EU 
intervention 
In the absence of EU-level action, the extent to which cash is accepted by businesses and the ability of 
citizens and businesses to get sufficient access to cash will remain suboptimal and variable across the 
euro  area,  due  to  the  lack  of  a  common  application  and  interpretation  of  legal  tender  principles. 
Regarding  acceptance,  this  means  that  the  mandatory  acceptance  principle  will  continue  to  be 
interpreted  differently,  and  good  faith  exceptions  to  the  mandatory  acceptance  principle  will  be 
differently applied on the ground; this is inconsistent with the notion that the single currency has legal 
tender across the euro area. Regarding access to cash, it is likely that at least some Member States, in 
particular  those  most  affected  by  the  decline  in  cash  payment  services  and  ATM  networks  on  their 
territories, will first take soft law or policy action to credit institutions of their social role to provide 
adequate  cash  services  to  citizens  and  business  customers,  with  the  needed  geographical  coverage. 
This  is  attested  by  the  range  of  measures  already  being  taken  by  some  Member  States,  including 
stakeholder agreements and/or covenants on access to cash services, memorandums with stakeholders, 
recommendations on fees and communication campaigns92. An example of this can be found in the 
Netherlands, where a recently set up covenant on cash access puts a temporary standstill on the further 
closure of ATMs and bank branches, pending possible decisions by the Dutch parliament in the first 
half of 2023 on measures to ensure access to cash.  
Under the current legal framework93, “cash back” services by retailers are possible and allow citizens 
to have access to cash, but only when they make a purchase. Thus, some retailers offer “cash back” 
services which can facilitate access to cash by enabling their customers to withdraw cash when paying 
for their groceries electronically. However, according to the ECB, these cash services are limited in 
their scope and, hence, cannot be regarded as full substitutes of traditional cash service points offered 
by  banks  or  postal  services94.  ELTEG  III  discussions  also  confirmed  that  neither  the  cash  services 
provided by post offices nor the cash-back service could be considered equivalent to ATMs in terms 
of providing access to cash, and hence should be seen as complementary to the services to be offered 
by credit/depository institutions. 95  

If these type of soft law measures do not work, Member States might resort to hard legislative actions 
to guarantee sufficient access to cash. Such legislative actions may further exacerbate the incoherence 
between those Member States that opt for these and those that do not, thereby risking highly divergent 
cash  access  levels  on  the  ground.  Both  soft  law  and  legislative  measures  taken  individually  by 
Member States may therefore not achieve a common minimum level of access to cash across the euro 
area and consequently risk to erode the effectiveness of the legal tender status of the euro. 

3  WHY SHOULD THE EU ACT?  

3.1 

Legal basis  

In accordance with Article 3(1)(c) TFEU, the EU has an exclusive competence in the area of 
monetary policy  for the  Member States whose currency  is  the euro. A new form of central 
bank money available to the general public, alongside the euro banknotes and coins, shall be 
established and regulated in its essential aspects by an EU Regulation based on Article 133 of 
the TFEU. This provision allows for laying down “measures necessary to the use of the euro 

92 For an overview of the measures currently being undertaken by the Member States, please see the final  ELTEG III report of July 2022. 
93 Directive (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015 on payment services in the internal 
market, amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU and Regulation (EU) No 1093/2010, and repealing Directive 
2007/64/EC (Text with EEA relevance) 
94 ECB, Access to cash, 12 November 2020, Access to cash (europa.eu).  
95 See ELTEG III report Ares(2022)5045125-220706 Final ELTEG report (3).pdf.  

26 

 
 
 
                                                           
as the single currency”. This has been emphasised by the Council recommendation of January 
2022 on the economic policy of the euro area for 2022. At the same time, as already noted, an 
EU  Regulation  based  on  Article  133  of  the  TFEU  cannot  interfere  with  the  definition  and 
implementation  of  monetary  policy,  which  is  entrusted  by  the  Treaties  to  the  ECB  while 
ensuring its independence. Hence, once the Union legislature will have adopted a Regulation 
establishing the digital euro, the decisions whether to issue digital euro, in what volumes and 
at which times, will fall within the ECB’s competence in a similar way as for banknotes.  

3.2 

Subsidiarity: Necessity and added value of EU action 

Action  by  the  euro  area  Member  States  is  not  possible  as  the  Union  has  an  exclusive 
competence in the area of monetary policy for the Member States whose currency is the euro. 
In  accordance  with  Article  5(3)  TEU,  the  principle  of  subsidiarity  does  not  apply  in  areas 
which fall within the Union’s exclusive competence. 

As  already  noted,  the  intervention  of  the  EU  legislator  is  needed  for  the  adoption  of  a 
regulation establishing the digital euro and regulating its essential aspects. The ECB may then 
take its decisions on the issuance of the digital euro and its volume, as a matter of defining 
and implementing monetary policy. 

Box D – Legal basis and subsidiarity for the legal tender of cash 
Legal basis 
The scope and effects of the legal tender of, and access to, euro banknotes and coins shall be regulated 
by an EU Regulation based on Article 133 of the TFEU, which provides for the adoption of measures 
necessary  for  the  use  of  the  euro  as  the  single  currency.  This  Treaty  provision  reflects  the  need  to 
establish uniform principles for all Member States whose currency is the euro, in order to safeguard 
the overall interests of the Economic and Monetary Union and of the euro as the single currency. 
Subsidiarity: necessity and added value of EU action  
Action by the euro area Member States to regulate the legal tender status of euro cash is not possible 
as  the  Union  has  an  exclusive  competence  in  the  area  of  monetary  policy  for  the  Member  States 
whose currency is the euro. In accordance with Article 5(3) TEU, the principle of subsidiarity does 
not apply in areas which fall within the Union’s exclusive competence. In order for citizens to be able 
to pay in cash, they need to have sufficient access to cash. The analysis of the problem in box B has 
shown  that  in  a  number  of  Member  States,  access  to  cash  has  significantly  declined,  and  there  is 
concern  about  a  possible  further  and  more  widespread  deterioration  in  access  to  cash  in  the  future. 
Action to safeguard access to cash is therefore necessary to ensure the effective use of euro banknotes 
and coins. While Member States may adopt legislative or non-legislative measures at national level to 
address  access  to  cash  on  their  territory,  only  the  Union  legislator  can  impose  a  euro  area  wide 
obligation on Member States to ensure sufficient and effective access to euro cash in accordance with 
Article 133. In order to take into account the heterogeneous situation in respect of access to cash in 
the Member States of the euro area, options for action at EU level to ensure sufficient and effective 
access to cash should allow appropriate flexibility for Member States to tailor the extent and nature of 
action to the situation on their territory, and should be proportionate to the objective to be achieved. 

4  OBJECTIVES: WHAT IS TO BE ACHIEVED? 

4.1  General objective 

Under the headline ambition “An economy that works for the people” of the Commission’s 
2019-2024  political  guidelines,  the  general  objective  of  this  initiative  is  to  ensure  that  the 
central  bank  money  issued  by  the  ECB  can  support  the  EU’s  economy  in  the  digital  age, 
while safeguarding the role of cash.  

27 

 
 
4.2 

Specific objectives 

The specific objectives are to: 

1.  Reinforce  the  euro’s  monetary  anchor  in  the  digital  age  by  ensuring  that  central  bank 
money in both its physical and future digital form is widely available to and accepted by 
all euro-area residents/businesses and tailored to their needs, while preserving financial 
stability.  

2.  Strengthen  the  EU’s  open  strategic  autonomy  by  increasing  the  euro’s  competitiveness 
vis-à-vis  other  currencies,  third  country  CBDCs  and  “stablecoins”  not  denominated  in 
euro. 

Achieving  these  objectives  by  establishing,  designing  and  issuing  a  digital  euro  raises  a 
number  of  trade-offs.  The  policy  options  need  to  take  into  account  these  trade-offs  and 
analyse their impacts. Especially as regards the first specific objective, the wide availability, 
presence and potential wide use of the digital euro require that many merchants accept it, and 
PSPs distribute it. At the same time, a level playing field with private means of payments on 
the EU’s payment market needs to be maintained (policy options 1). Furthermore, privacy is 
a fundamental right and people appreciate the high level of privacy offered by cash payments. 
However, full anonymity of payments can be in contradiction with the goals of anti-money-
laundering  and  terrorist  financing  policies  (policy  options  2).  Finally,  potential  wide  use 
should not pose risks to financial stability (policy options 3). As regards the second specific 
objective,  the  potential  international  use  of  the  digital  euro  should  neither  endanger  the 
monetary  and  financial  autonomy  of  non-euro  area  countries,  nor  cause  harm  to  the 
Eurosystem  balance  sheet  and  its  monetary  autonomy  (policy  options  4).  Table  1  below 
provides an outline of how these trade-offs are taken into account in the option structure. 

4.1 

Intervention logic 

Problem drivers 

D1: In a rapidly digitalizing economy, central bank money 
in physical form, i.e. cash, is not available for payments in 
a growing part of the economy. 

D2: Third country CBDCs and “stablecoins” not 
denominated in euro may gradually gain market share 
in the euro area’s payment markets and reduce the role 
of the euro  

Problem 

Physical central bank/ECB money (cash) alone is not sufficient in the digital age to support the role of public 
money in the EU’s economy: provide a monetary anchor and support the EU’s open strategic autonomy 

Consequences 

People:  
 

Limited choice in 
pan-European 
payments and 
innovative 
payments 
Financial inclusion 
may be eroded 

 

Businesses: 
  Merchants: Limited choice when accepting 

 

payments 
Innovative businesses: potential loss of 
competitiveness due to higher risks (credit, 
forex, political) when relying on innovative 
payment solutions provided by foreign 
CBDCs or “stablecoins” or other private 
solutions lacking monetary anchor. 

Eurosystem and EU’s economy: 
1.  Weakening monetary anchor 
can lead to weakened trust in 
the financial sector 
2.  Potential limitations on 

monetary policy weakens open 
strategic autonomy  
3.  Financial stability risks 
4.  Weakening international role of 

the euro  

Objectives 

Ensure that the central bank money issued by the ECB can support the EU’s economy in the digital age, while 
safeguarding the role of cash. 

28 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SO1: Reinforce the euro’s monetary anchor in the digital 
age by ensuring that central bank money in both its 
physical and future digital form is widely available and 
accepted by all euro-area residents/businesses and tailored 
to their needs, while preserving financial stability. 

SO2: Strengthen the EU’s open strategic autonomy by 
increasing the euro’s competitiveness vis-à-vis other 
currencies, third country CBDCs and stablecoins  

Policy options and trade-offs 

Establishment of a digital euro and developing its payment system 

No digital euro  versus     

SO1+SO2 Legal tender – ensure wide availability, distribution, and acceptance while ensuring level playing field 
with private payment services 

SO1 Privacy – to foster trust and enable wide usage 
while managing risks of money laundering and terrorist 
financing 

SO1 Store of value - Limiting its store of value function 
to preserve financial stability 

SO2 International use – to increase the international 
role of the euro and the EU’s open strategic autonomy 
while protecting the Eurosystem’s balance sheet and 
monetary sovereignty and the stability of non-euro 
area countries 

29 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5  WHAT ARE THE AVAILABLE POLICY OPTIONS?  

5.1 

Baseline - no digital euro 

The  EU  would  not  develop  any  new  regulatory  or  non-regulatory  action  on  a  central  bank 
digital currency. The ECB would thus not be in a position to decide to issue a digital euro for 
retail use. To achieve the objectives laid down in Commission retail payment strategies and 
promote  the  international  role  of  the  euro  and  the  EU’s  open  strategic  autonomy,  the 
Commission  and  the  ECB  would  concentrate  on  improving  the  EU’s  payment  systems  that 
use private money without having the tools to ensure the availability and usability of central 
bank money in payments in the increasingly digital economy. 

5.2 

Establishing and regulating a digital euro 

Under  this  option,  the  Commission  would  propose  a  Regulation  on  the  digital  euro 
establishing a digital form of central bank money available for use by people and businesses, 
and  regulating  its  essential  aspects.  Based  on  the  Regulation,  the  ECB/Eurosystem  may 
decide  to  issue  a  digital  euro  in  addition  to  banknotes  and  coins.  As  explained  in  the 
introduction,  this  Regulation  would  establish  the  digital  euro  in  the  relevant  framing 
legislation. When the ECB concludes that the problems and risks described above justify the 
issuance of the digital euro, it could issue the digital euro given that it has been established by 
the Regulation, based on its own powers derived from the Treaties. How well a digital euro 
can  achieve  the  general  and  specific  objectives  set  out  above,  also  depends  on  how  the 
Regulation  addresses  the  digital  euro’s  essential  aspects,  since  these  aspects  will  drive  the 
usage, availability and acceptance of the digital euro as well as its competitiveness. 

This  section  therefore  sets  out  policy  options  on  a  number  of  essential  aspects/trade-offs 
(sections  5)  and  analyses  their  impact  (section  6),  before  coming  back  to  an  overall 
assessment of impacts of establishing and regulating a digital euro (section 7).  

The  policy  options  listed  in  the  table  below  relate  to  the  essential  aspects  of  a  digital  euro 
which  were  selected  in  view  of  (i)  their  significant  potential  impact  on  society,  economy, 
people and businesses and (ii) their importance in reaching the objectives of the digital euro. 
The  options  in  the  respective  subsections  are  to  be  seen  as  mutually  exclusive,  unless 
indicated otherwise.  

The  legal  tender  status  of  a  digital  euro  would  largely  affect  how  both  specific  objectives 
could  be  achieved.  Acceptance,  distribution  and  the  compensation  model  will  also 
significantly  affect  wide  availability  and  usage  and  thus  contribute  to  maintaining  the 
monetary anchor and strengthening the open strategic autonomy of the EU. At the same time, 
it  is  important  to  maintain  level  playing  field  with  the  private  payment  solutions  and 
encourage  other  pan-European  payment  solutions  in  line  with  the  Commission’s  Retail 
Payment Strategy. The privacy design will influence the potential wide use of a digital euro, 
as  evidenced  by  the  consultations  and  market  research.  At  the  same  time  the  objectives  of 
anti-money laundering and terrorist financing need to be balanced with the desired privacy. 
Furthermore, while potential  holding  limits  may reduce the usability of  a digital  euro, such 
features may be key in maintaining financial stability. Finally, the potential international use 
of a digital euro would contribute to increasing the international role of the euro. At the same 
time, the balance sheet of the Eurosystem needs to be protected and the stability (both macro 
and  financial  sector)  of  non-euro  area  Member  States  needs  to  be  maintained.  This  latter 
aspect will be key especially in achieving the second specific objective. 

30 

 
 
Table 1. Trade-offs and policy options 

Trade-offs  
Enable wide usage 
while ensuring level 
playing field with 
private payment 
solutions 

NB: 
The set of options 
a/b/c, d/e/f and g/h/i 
are exclusive within 
their groups but 
complementary 
between each other 
(with the exception of 
1a, which would be 
exclusive to all other 
options) 

Protection of privacy 
and  ensuring 
traceability  

NB: 
Options 2d and 2e 
can be combined with 
Options 2a, 2b and/or 
2c. 

Ensure wide usage 
while protecting 
financial stability and 
credit provision 

Benefit from 
international use 
while mitigating risks 
for non-euro 
countries and the 
Eurosystem 

Specific Objectives and Policy options 
SO1 and SO2 

Access and Usability 

Legal tender status 
Option 1a - Digital euro without legal tender status 
Option 1b - Digital euro with legal tender status, including general mandatory 
acceptance by payees 
Option 1c - Digital euro with legal tender status with some exceptions to mandatory 
acceptance  

NB: options 1b and 1c are also linked in terms of coherence to the legal tender status 
of cash. 

Distribution 
Option 1d - Compulsory distribution of digital euro by all PSPs  
Option 1e - Compulsory distribution of digital euro by credit institutions with retail 
business   
Option 1f - No compulsory distribution of digital euro by PSPs, subject to a review 
clause 

NB: sub-options 1(b-c)i and 1(b-c)ii regarding the access to euro cash are further 
described in box D. 

Compensation model and fees on merchants 
Option 1g - Merchant fee pricing left to the market 
Option 1h - ECB mandated to regulate merchant fees on the basis of criteria set by the 
legislature 
Option 1i - ECB mandated to issue pricing expectations/guidelines on merchant fees 
on the basis of criteria set by the legislature 
SO1 

Privacy 
Option 2a – No processing of personal data related to a user’s identity or transactions  
Option 2b –  Processing of personal data related to a user’s identity, but not to 
transaction data  
Option 2c –  Processing of personal data related to a user’s identity and transaction 
data  
Option 2d – Processing of personal data related to a user’s identity, but not to 
transaction data for offline low value payments – non-exclusive option 
Option 2e - Processing of personal data related to a user’s identity, but not to 
transaction data for online low value payments – non-exclusive option 
SO1 

Financial stability and credit provision 
Option 3a – Digital euro with unrestricted store of value function  
Option 3b – Possibility of introducing limits to the digital euro’s store of value 
function  
SO2 

International use 
Option 4a - Digital euro available for all EU residents/businesses and third countries 
residents/businesses  
Option 4b - Digital euro available for visitors to the euro-area and under conditions for 
non-euro area residents/businesses and third countries residents/businesses  
Option 4c - Digital euro available only for euro-area residents/businesses and visitors 
to the euro-area  

31 

 
 
 
 
 
 
Technical design choices that are not of a regulatory nature and fall within the competence of 
the Eurosystem are not the focus of analysis in this impact assessment as they will be made 
by the ECB/Eurosystem when developing a digital euro.96  

The  digital  euro  project  being  investigated  by  the  ECB  is  based  on  the  following  working 
assumptions:  

  Use  case  prioritisation.  Depending  on  technical  feasibility,  the  first  release  of  the 
digital euro may target payment segments that have the highest  additional value for 
users  and  potential  network  effects,  i.eP2P  and  P2B-(e-commerce  payments.  In 
subsequent releases, additional use cases could be added, also depending on market 
developments, including P2B-POS and M2M payments. 

  Offline and online digital euro. The first releases of the digital euro would aim to be 
available  for  both  an  offline  (bearer  based)  and  an  online  use  (account  based),  as 
described in  Section 1.2 and would aim to  serve the use cases identified in  Section 
1.2  (e.g.  Person-to-Person,  POS,  e-commerce).  Online  and  offline  functionalities 
outlined in the ECB digital euro report are further presented in Annex 5.  

  Future payment needs. The ECB is monitoring emerging trends in industry 4.0 such 
as  machine-to-machine  and  conditional  payments,  which  are  presented  in  Annex  8, 
and is looking into solutions to respond to these trends in future releases of a digital 
euro.  

  Distribution by PSPs.  The digital  euro, issued  by the Eurosystem,  would  be made 
available  to  people  and  businesses  by  PSPs,  which  would  perform  the  functions 
which  payment  legislation  (PSD2)  entitles  them  to  provide.  The  main  categories  of 
PSPs  that  would  be  best  suited  to  distribute  the  digital  euro  are  credit  institutions, 
payment  institutions  and  electronic  money  institutions.  Acquiring  services  to 
merchants  would  likely  be  provided  by  the  same  PSPs  that  currently  offer  such 
services  in  relation  to  private  payments  e.g.  card  payments.  When  distributing  the 
digital  euro,  PSPs  could  leverage  their  existing  customer  facing  services  and  avoid 
the  costly  duplication  of  processes.  PSPs  would  for  instance  open  and  close  digital 
euro  accounts,  provide  front-end  solutions,  carry  out  customer  due  diligence, 
AML/CFT  and fraud checks,  and process payment  transactions (to the exclusion of 
settling them since this  task  would  fall under the responsibility of the Eurosystem). 
While  the  PSPs  would  execute  the  account  management  functions  and  operations 
described  above,  the  digital  euro  would  remain  a  direct  claim  towards  the 
Eurosystem.  At  the  same  time,  it  is  envisaged  that  PSPs,  and  not  the  Eurosystem 
directly,  would  have  a  contractual  account  management  relationship  with  the  end 
user. 

  The  settlement  of  the  on-line  digital  euro  (i.e.  validation  and  recording  of  the 
transaction) will be made under the control of the Eurosystem. The settlement of the 
offline  digital  euro  would  rely  on  local  storage  (secure  hardware)  where  no  third 
party would be involved. 

  Free use of basic services with the digital euro for private individuals. According 
to  the  ECB’s  report  on  a  digital  euro,  the  digital  euro  should  be  free  of  charge  for 

96 Assessment of the influence of technical design choices including on the protection of privacy and personal data falls within the 
competence of the ECB/Eurosystem in line with the applicable data protection laws. 

32 

 
 
                                                           
basic  use  by  private  individuals.  The  reason  for  that  is  that  if  the  digital  euro  is 
granted  legal  tender  status,  it  would  have  to  be  accepted  at  face  value.  The  digital 
euro could hence not be subject to fees that would erode directly or indirectly the face 
value  of  holdings  and  payments  received  (unless  there  is  a  proper  justification  for 
such fees and they respect the principle of proportionality). Basic use services would 
include,  in  particular,  the  opening  of  digital  euro  wallets/accounts,  making  basic 
payments  in  digital  euro  as  well  as  the  funding  and  defunding  of  digital  euro 
accounts/wallets. 

  Ensuring pan euro area reach from a technical perspective. The ECB would need 
to ensure that if a citizen is provided with a digital euro payment instrument by one 
intermediary in one country, it can use this instrument without barriers to pay at any 
merchant accepting digital euro in the euro area, independent of the intermediary and 
the country of the merchant. A set of technical rules standards and procedures will be 
developed together with  market participants in order to  guarantee the pan-euro area 
reach of the digital euro.97 

These ECB working assumptions outlined above are explicitly or implicitly reflected in the 
impact assessment. 

5.2.1  Access and Usability 

The  usage,  availability  and  acceptance  of  the  digital  euro  as  well  as  its  competitiveness 
(specific objectives 1 and 2) largely depend on the ability, willingness or legal obligations of 
payers and payees to use the payment means in transactions, and on its costs for payees and 
payers.  

The  digital  euro  would  co-exist,  complement  and  to  some  extent  compete  with  private 
payment solutions on the EU’s payment market. Private payment solutions include domestic 
and international payment cards, instant payments, and any other payment solutions that build 
on them e.g. digital wallets. They provide substantial benefit for both people and businesses 
by offering a fast, reliable and efficient payment in both physical (shops, restaurants, etc.) and 
online (e-commerce) environment.  

This  payment  market  is  a  dynamic  one  shaped  by  consumers’  evolving  preferences  and 
technological  evolution.  The  digital  euro  aims  at  offering  payments  through  an  electronic 
version  of  central  bank  money  (CBDC),  which  currently  is  not  available  for  people  and 
businesses. The digital euro would offer citizens a free (at least for basic services) payments 
alternative,  on  top  of  the  existing  payment  means.  Depending  on  consumers’  evolving 
preferences,  a  digital  euro  could  be  used  in  parallel  with  private  solutions  such  as 
international  and  domestic  card-based  payments,  instant  payments  and  new  upcoming 
possible payment means such as stablecoins. While the digital euro would offer an additional 
choice  for  users,  ensuring  a  level  playing  field  between  payments  in  digital  euro  and  with 
private  services  is  important  to  ensure  competition,  and  maintain  and  maximise  the  overall 
value of payment services for the EU’s economy. 

97 In January 2023, the ECB set up a Rulebook Development Group (RDG). The digital euro RDG will develop as main deliverable a draft 
digital euro rulebook which will consist of a set of rules, practices and “standards” that will allow the distribution of digital euro through 
intermediaries by the means of user management, liquidity management and transaction management. The RDG consist of a maximum of 24 
members  and  composed  by  10  representatives  from  the  public  and  14  representatives  from  the  private  sector.  The  private  sector 
representatives  come  from  consumer  organisations,  corporate  treasurers,  small  and  medium  sized  businesses,  retailers  with  a  physical 
presence, online retailers, acquirers, the European Payment Council, credit institutions, payment institutions. An approved draft of the first 
version of the digital euro scheme rulebook will be subject to a public consultation. 

33 

 
 
                                                           
Legal tender status 

A critical question which is considered in the context of the access to and the usability of the 
digital euro is whether it should be granted the legal tender status, and if so, if exceptions to 
the mandatory acceptance deriving from this status should be specified. Options 1a, 1b and 1c 
are mutually exclusive options. 

Option 1a: Digital euro without legal tender status  

Under  this  option,  the  digital  euro  would  be  issued  without  legal  tender  status.  Euro 
banknotes  and  coins  would  remain  the  only  forms  of  the  euro  in  circulation  having  legal 
tender status. Therefore, the acceptance of payments in digital euro would depend on whether 
payers  and  payees,  typically  merchants  (shops,  hotels,  restaurants,  e-commerce  etc.),  are 
willing to accept the digital euro.  

Option 1b: Digital euro with legal tender status, including general mandatory acceptance by 
payees  

Under this option, legal tender status for the digital euro would be defined and no exceptions 
would  limit  the  principle  of  mandatory  acceptance,  save  for  natural  persons  acting  in  the 
course of a purely personal or household activity who would not be obliged to accept digital 
euro payments. All other payees would be required to accept payments in digital euro. Such a 
default obligation of the payee to accept payments in digital euro at face value would entail a 
right of the payer to pay with the digital euro and discharge its debt. This is without prejudice 
to the possibility for the parties to a transaction to freely agree, contractually, on a different 
means of payment. 

Option  1c:  Digital  euro  with  legal  tender  status  with  some  exceptions  to  mandatory 
acceptance  

Under this option, legal tender status for the digital euro would be defined as in Option 1b, 
subject  to  exceptions  to  the  principle  of  mandatory  acceptance.  The  Regulation  would 
provide  that  the  following  categories  of  payees  would  be  exempted  from  mandatory 
acceptance:  

  Payees  who  qualify  as  microenterprises  (less  than  10  employees  and  a  turnover  or 
balance  sheet  size  under  EUR  2  million)98  or  non-profit  legal  entities,  unless  they 
already  accept  digital  payments.  This  exception  would  cater  for  the  necessary 
proportionality  for  microenterprises  and  non-profit  legal  entities  which  only  accept 
cash  and  would  avoid  imposing  costs  of  infrastructure  to  process  digital  euro 
payments.  

  Payees  who  refuse  a  digital  euro  payment  in  good  faith,  based  on  legitimate  and 
temporary grounds and in line with the principle of proportionality in view of concrete 
circumstances, beyond the control of the payee, where the payee would bear the burden 
of  proof.  This  exception  would  allow  payees  to  refuse  individual  digital  euro 
payments  in  cases  such  as a power outage  or an internet  blackout preventing online 
digital  euro  payments.  In  case  a  dispute  would  arise  on  the  fulfilment  of  these 

98 As defined in the EU recommendation 2003/361. 

34 

 
 
                                                           
conditions,  the  payee  would  have  to  prove  that  the  conditions  were  met  and  that 
he/she rightfully refused to process the payment in digital euro. 

  Natural  persons  acting  in  the  course  of  a  purely  personal  or  household  activity,  as 
natural  persons  should  be  free  to  select  the  means  of  payment  of  their  choice  to 
discharge a debt purely relating to the private sphere. 

  Payees who have expressly agreed with payers on a different means of payment prior 
to the payment. This exception would cater for a certain level of contractual freedom 
as  some  Member  States  are  of  the  view  that  mandatory  acceptance  of  digital  euro 
payments should not limit the contractual freedom of parties to pay with the means of 
payment of their choice.  

Additionally,  a  framed  delegated  power  for  the  Commission  could  be  defined  that  would 
allow  introducing  additional  exceptions  to  mandatory  acceptance,  which  would  apply  in  a 
harmonized  way  across  the  euro  area.  Nonetheless,  such  additional  exceptions  would  still 
need  to  ensure  the  necessary  network  effects,  and  the  use  of  the  digital  euro  as  a  single 
currency in the euro area, while avoiding imposing a disproportionate burden.99  

Distribution 

As introduced above, it is expected that intermediaries and not the Eurosystem directly would 
distribute  the  digital  euro.  Intermediaries  have  experience,  infrastructure,  processes  and 
customer  relations  that  enable  them  to  distribute  the  digital  euro  more  efficiently  than  the 
Eurosystem. Furthermore, the ECB’s statute does not allow the opening of accounts to non-
financial sector institutions, businesses and natural persons. 

The distribution of the digital euro primarily means the provision of basic services to its users 
(e.g. opening, managing and closing digital euro accounts, non-automated payments in digital 
euro).  

Option 1d: Compulsory distribution of digital euro by all PSPs  

Under this option, payment service providers would be obliged to distribute the digital euro 
on request.  

Compulsory  distribution  would  ensure  the  availability  and  enable  wide  usage  of  the  digital 
euro  as  a  means  of  payment  and  would  ensure  the  effectiveness  of  a  possible  legal  tender 
status under Option 1b or 1c.  

99 Provided fees for the distribution of the digital euro are not disproportionate in comparison with currently accepted electronic means of 
payment by merchants. 

35 

 
 
 
 
                                                           
Option 1e: Compulsory distribution of digital euro by credit institutions with retail business 

To avoid disproportionate costs and comply with the principle of proportionality, mandatory 
distribution would be limited to credit institutions that are providing equivalent retail business 
services  in  commercial  bank  money.  Other  PSPs  (e.g.  electronic  money  and  payment 
institutions) would be free to decide whether or not to distribute the digital euro. 

The  selection  of  credit  institutions  as  compulsory  distributors  considers  three  main  factors. 
First, under PSD2, account servicing payment service providers (ASPSPs) can offer services 
related to account management. They include the following institutions: payment institutions 
(PIs),  electronic  money  institution  (EMI),  credit  institutions  (CIs).  Other  PSPs,  such  as 
payment  initiation  services  providers  (PISPs)  and  account  information  services  providers 
(AISPs)  offer  services  based  on  access  to  payment  accounts,  but  do  not  provide  account 
servicing payment services, and therefore would not be able to offer some of the distribution 
services  mentioned  above,  based  on  AIS/PIS  license  only.  The  same  holds  true  for  PSPs 
providing only money remittance services. 

Second, among the ASPSPs only credit institutions have access to central bank reserves. This 
ability is key when converting commercial bank money into central bank money i.e. funding 
digital euro at the request of clients.  Lacking access to central bank reserves, EMIs and PIs 
would be able to  offer funding services  for their clients  only  with  the cooperation of credit 
institutions, which would entail additional cost for them. 

Third, not  all credit institutions have retail  business  i.e. offer account  management services 
for people as they specialise on serving businesses or provide investment services. It would 
not  be  proportionate  and  rational  to  oblige  these  more  specialised  credit  institutions  to 
distribute the digital euro. 

Consequently,  only  credit  institutions  that  have  retail  business  can  offer  the  full  range  of 
basic  digital  euro  services  for  users  without  relying  on  other  providers  and  without 
disproportional investment needs and costs. 

Option 1f: No compulsory distribution of digital euro by PSPs subject to a review clause 

Under  this  option,  distribution  of  the  digital  euro  would  be  left  to  PSPs  business  decisions 
who  may  thus  decide  not  to  offer  the  service  upon  request.  As  part  of  this  option,  the 
Commission would assess the functioning of the market for the distribution of the digital euro 
after  its  issuance  and  determine  whether  it  is  adequately  developed  to  ensure  a  sufficient 
access  to  the  digital  euro  for  people  and  businesses,  and  whether  additional  measures 
regarding distribution would be required.  

Compensation model  

The compensation model for the digital euro not only determines the  costs and revenues of 
the  different  stakeholders  of  digital  euro  payment  transactions,  but  through  its  incentive 
structure  has  an  influence  on  its  competitive  position  in  the  markets  for  retail  payments 
affecting its future use. The choice of the digital euro compensation model needs to consider 
several aspects. 

First, payment services are two-sided network markets, where market dynamics depend not 
only  on  the  total  costs  of  the  payment,  but  also  on  the  relative  costs  on  the  two  sides. 
Different  stakeholders  may  take  the  position  of  the  payer  and  payee  side  depending  on  the 

36 

 
 
actual use case, such as P2P, POI, P2G, G2P etc. Payments with a digital euro intermediated 
by PSPs (at least for online) may also follow a four-party model100. 

Second, the basic payment services of the digital euro as public money would be offered for 
free to private individuals. The reason is that the digital euro – like cash – would be a public 
good  enjoying,  preferably,  legal  tender  status  and  can  therefore  not  be  subject  to  fees  that 
would erode directly or indirectly, the face value of holdings and payments received, unless 
there is a proper justification for such fees, and they respect the principle of proportionality.  

Third,  the  PSPs  that  distribute  the  digital  euro  to  both  people  and  businesses  should  get 
compensation in order to maintain their economic incentives to provide quality services in a 
competitive  environment.    This  includes  merchant  fees  that  merchants  would  pay  to  their 
acquirers  for  POI  payments.  However,  merchants  –  especially  smaller  merchants  –  already 
have  limited  countervailing  market  power  in  the  acquiring  market,  which  would  be 
aggravated by  any acceptance obligation.  Granting the digital  euro legal  tender status,  with 
the  corollary  of  mandatory  acceptance,  carries  the  risk  that  intermediaries  overcharge 
merchants for digital euro payment services if the pricing is left entirely to the market, given 
that  merchants  would  have  no  choice  but  to  accept  digital  euro  payments.  Therefore,  one 
should consider certain measures to address merchant fees, should these risks materialise. 

Fourth,  four-party  models,  such  as  several  payment  card  schemes,  often  apply  inter-PSP 
(interchange) fees as a tool that redistributes costs and revenues between the intermediaries 
on the issuer (payer) and the acquirer (payee) side101. The existence of such interchange fees 
for competing retail payment schemes raises the question of its application in the digital euro 
payment scheme as well due to level playing field reasons. The potential application of intra-
PSP  fees  in  the  digital  euro  scheme  would  have  to  take  into  account  several  aspects:  (i)  it 
could  provide  at  least  partial  compensation  for  issuers  that  are  mandated  to  provide  digital 
euro  basic  services  for  free  for  private  individuals;  (ii)  it  would  build  into  the  fees  that 
merchants  pay  for  acquiring  services102,  a  particular  concern  in  the  presence  of  any 
acceptance  obligation;  (iii)  it  changes  the  economic  incentives  of  the  four-party  model 
participants, hence would affect the competitive outcome on the market of retail payments. 

Fifth,  the  digital  euro  compensation  model  should  aim  to  preserve  level  playing  field  with 
other  private  means  of  payment  to  foster  competition  and  innovation.  The  objective  of  the 
digital euro is to enable the choice of using central bank money in the digital economy,  but 
not to decide the competitive outcome e.g. by crowding out existing other private means of 
payment. 

Three options regarding the compensation model and merchant fees may be considered:  

Option 1g: Merchant fee pricing left to the market 

100 In the four-party model, four main entities are involved in payment transactions: (i) the customer making a payment; (ii) the customer’s 
PSP or issuer, which holds the customer’s funds and has issued the payment instrument (typically card); (iii) the merchant accepting the 
payment; (iv) and the merchant’s PSP or acquirer, which provides the necessary facilities for the merchant, such as point-of-sale (POS) 
hardware and software, and initiates the processing of transactions. Visa, MasterCard, and domestic card schemes operate in a four-party 
model. 
101 In the POI environment interchange fees are paid by the acquirer to the issuer. 
102 Hence restrict competition on the acquiring side as interchange fees create a floor for merchant fees, i.e. merchants are unable to 
negotiate merchant fees below these interchange fee levels. 

37 

 
 
                                                           
Under  this  option,  the  PSPs  would  set  the  merchant  fee  (acquiring  and/or  inter-PSP  fees) 
based on bilateral negotiations with each other and the merchants103, and competition on the 
market. It should be noted that in the presence of inter-PSP fees, merchants will not be able to 
negotiate merchant fees below these inter-PSP fee levels.  

Option  1h:    Determination  of  maximum  amounts  of  merchant  fees  on  the  basis  of  a 
methodology set by the legislature and developed by the ECB  

Under this option, mandatory caps on merchant fees (acquiring and/or inter-PSP fees) would 
be  based  on  specific  criteria  set  by  the  legislature  (e.g.  considering  intermediaries’  costs, 
considering  the  Interchange  Fee  Regulation  or  the  merchant  indifference  test104  as 
benchmarks  for  inter-PSP  fees,  considering  the  two-sided  and  network  nature  of  payments, 
no excessive fees for merchants, no crowding-out of private means of payment), and to adapt 
it periodically in view of market developments. 

Option  1i:  Pricing  recommendations  on  merchant  fees  on  the  basis  of  criteria  set  by  the 
legislature 

In the absence of observable market data, even before the issuance of a digital euro, the ECB 
could be mandated/requested to provide pricing recommendations or guidelines that merchant 
fees (acquiring and inter-PSP fees) should follow on the basis of criteria set by the legislature 
(e.g.  considering  intermediaries’  costs,  considering  the  Interchange  Fee  Regulation  or  the 
merchant  indifference test  as benchmarks for  inter-PSP  fees,  considering the two-sided  and 
network  nature  of  payments,  no  excessive  fees  for  merchants,  no  crowding-out  of  private 
means of payment), and to adapt it periodically in view of market developments.  

Legal tender status of euro cash 

Regulating  the  legal  tender  status  of  the  digital  euro  (options  1b  and  1c)  would  have 
implications in terms of coherence for the legal tender status of euro cash (see box E below) 
even though the provisions laid down in each Regulation need not be identical105. 

Box E – Legal tender status of cash 

Acceptance of cash 
In terms of the content of a legislative proposal on the legal tender of euro cash, there is broad support 
from euro area Member States that there should be at least a codification of the jurisprudence of the 
Court of Justice of the European Union, also taking into account the Commission Recommendation 
on the key principles of legal tender. These are: mandatory acceptance in principle, at full face value, 
with the power to discharge payment obligations. Furthermore, the analysis undertaken in the context 
of  ELTEG,  the  ELTEG  principles  set  out  in  the  ELTEG  III  report  and  the  targeted  stakeholder 
consultation  results  also  suggest  that  more  detailed  clarifications  as  to  the  meaning  of  legal  tender 
should  be  considered  for  the  legal  proposal  to  ensure  added-value  and  legal  certainty,  whilst 
respecting  the  jurisprudence  of  the  Court  of  Justice  of  the  European  Union.  In  particular,  the 
Commission Regulation on the legal tender of cash should also include106: 

  A  non-exhaustive  specification  of  possible  exceptions  to  the  principle  of  mandatory 

103 While PSPs negotiate with their merchant customers bilaterally during onboarding (merchant service charge), bilateral negotiations 
among more than 4,000 PSPs can face substantial practical difficulties (inter-PSP fees). Inter-PSP fees therefore are typically negotiated 
multilaterally under the scheme rules, or are set by the scheme owner (as a default fee) in competing retail payment schemes. 
104 See section 6.x for details. 
105 ELTEG III Report, 2022: 24.”When regulating the legal tender status of central bank money in its physical and digital forms, there is a 
need  for  coherence  and  consistency  between  the  legal  acts,  as  well  as  with  other  existing  legislation.  The  Regulations  do not need  to  be 
identical, since the concrete implementation of the key principles of legal tender can differ for physical and digital forms of money (e.g. the 
availability of change is not applicable in a digital context)”. 
106 For further explanation of the elements to be included, please see Annex 7. 

38 

 
 
                                                           
acceptance based on the ‘good faith’ principle;  

  A  provision  empowering  the  Commission  to  introduce  rules  of  a  monetary  law  nature  that 
would establish additional but limited exceptions to the principle of mandatory acceptance, on 
condition that they are justified and proportionate, after consulting the ECB; 

  A provision requiring Member States to monitor cash acceptance levels in their area and the 
prevalence of unjustified no-cash policies and to take  measures if acceptance of cash is not 
ensured. 

As these matters relate to the scope, effects and exceptions to the key principles of legal tender which 
are covered in the jurisprudence of the Court, legislating on these matters would be largely a matter of 
clarification and codification in the interests of coherence and better law-making, with little margin 
for policy choice. These aspects are therefore not further assessed. 

Access to cash 
While the issue of acceptance of cash and its exceptions is covered in the Court jurisprudence, issues 
concerning problems with access to cash have been raised by Member States and stakeholders and are 
not covered by the Court ruling. The nature of these problems are outlined in the problem definition 
(box B) and elaborated in annex 7. These actions could in principle be addressed in one of two ways, 
as set out below. 

Option 1(b-c)i: A soft law instrument (e.g. a Commission Recommendation)  
Under  option  1(b-c).i,  the  Commission  would  adopt  a  Recommendation  addressed  to  the  Member 
States, which would invite them to take  measures (via soft law or national law) to incite or require 
banks to provide a certain minimum level of access to cash via their bank branches or ATMs within a 
certain  geographic  area.  Member  States  would  also  be  invited to recommend  to  non-banks,  such as 
post  offices  or  retailers,  to  provide  access  to  cash  to  the  public  or  businesses  as  a  complement  to 
banks.  Finally  Member  States  would  be  invited  to  monitor  the  levels  of  bank  and  ATM  provision 
across their territory to assess whether or not it is sufficient. 

Option 1(b-c)ii: A legally binding obligation on Member States in the proposed Regulation on legal 
tender of cash to be implemented by Member States 
Under option 1(b-c)ii, the Commission would include in its proposed Regulation on the legal tender 
of cash a legally binding obligation on Member States to ensure sufficient and effective access to cash 
on their territory. To comply with this obligation, Member States would be required to designate one 
or  more  competent  national  authorities  with  oversight  and  regulatory  powers  over  the  market 
activities of the cash industry, which could be an existing authority such as the national central bank. 
In order to assess whether access to cash is ensured, these designated national competent authorities 
would be obligated to monitor access to cash on the basis of a set of common indicators. To this end, 
the  Commission  would  be  able  to  adopt  an  implementing  act  in  order  to  specify  a  set  of  common 
indicators, which will allow the Member States to assess the access to cash in their territory and in all 
their different regions and urban areas.  

The Member States would have to notify the results of their monitoring and analysis of the situation 
as  regards  access to  cash  in  an  annual  report  to  be  addressed to  the  Commission  and  the  European 
Central  Bank.  This  report  should  assess  whether  there  is  sufficient  and  effective  access  to  cash 
throughout the national territory and in all regions and urban areas, giving grounds and objective data 
for its assessment. If a Member State concludes that access to cash is sufficient and effective, it would 
not  be  required  to  take  action.  Conversely,  if  a  Member  State  concludes  that  access  to  cash  is  not 
sufficient  and  effective  in  all  or  part  of  its  territory,  or  is  at  risk  of  deteriorating  in  the  absence  of 
action, appropriate measures would have to be taken to remedy the situation. These measures could 
include the setting of geographic access requirements on credit institutions to maintain cash  services 
at a sufficient number of their branch offices where they conduct business, or through an appointed 
agent  for  online  only  credit  institutions,  and/or  maintain  a  sufficient  density  of  ATMs  where  they 
conduct  business  taking  into  account  a  good  geographic  spread  in  relation  to  population.  Other 
measures could include a regulation of fees, if necessary, or recommendations addressed to non-credit 
institutions,  such  as  independent  ATM  operators,  retailers  or  post  offices,  encouraging  them  to 
complement the cash services of banks. 

39 

 
 
 
The Commission would examine the annual reports in close consultation with the European Central 
Bank.  If  the  measures  proposed  by  a  Member  State  appear  insufficient,  or  if  the  Commission 
considers that access to cash in a Member State is not sufficient in spite of the findings of the annual 
report,  the  Commission  would  be  able  to  adopt  implementing  acts  providing  for  adequate  and 
proportionate measures that need to be adopted by the Member State concerned.  

5.2.2  Privacy and personal data protection 

The usage and acceptance of a digital  euro (specific objective 1) will depend on ensuring a 
high  level  of  privacy  and  data  protection.  Ensuring  high  level  of  privacy  and  personal  data 
protection  is  important  to  foster  public  trust  in  a  digital  euro,  within  the  euro  area  and 
beyond.107 The right to privacy and personal data protection are fundamental rights enshrined 
in  the  Charter  of  Fundamental  Rights  of  the  European  Union108  and  their  protection  was 
highlighted  as  a  key  concern  both  in  the  Eurosystem  Report  on  a  digital  euro,109  the  ECB 
consultation110  and  the  Commission’s  targeted  consultation.  Indeed,  the  public  may  expect 
that payments in digital euro will provide for a high degree of privacy and data protection, as 
the public may to a certain extent draw an analogy to cash as the current form of central bank 
money, which offers a high degree of privacy.111  

At the same time, a users’ right to data protection and privacy can be limited in accordance 
with  Article  52  of  the  Charter112  when  this  is  necessary  to  achieve  important  objectives  of 
public  interests,  insofar  such  limitations  are  proportionate  and  respect  the  essence  of  the 
rights  concerned.  Any limitation  on the  protection of personal  data and privacy must apply 
only  in  so  far  as  it  is  strictly  necessary.  Such  limitations  already  exist  in  EU  law,  e.g.  to 
ensure  transparency  and  traceability  for  the  purpose  of  combatting  and  preventing  money 
laundering, terrorist financing or tax evasion.113  

The processing of personal data may be necessary, while fully respecting the requirements of 
the Charter, for specified purposes. For example, ensuring a necessary level of traceability of 
transactions  is  important  to  achieve  public  policy  objectives  underpinning  the  AML/CFT 
framework.  It  might  also  be  necessary  to  comply  with  the  obligations  related  to  taxation, 
which  are  applicable  to  funds  (e.g.  the  Common  Reporting  Standard/Directive  on 
Administrative Co-operation 2). Personal data processing may also be necessary for activities 
related to  the use and distribution  of a digital  euro,  including payment  settlements,  funding 
and  defunding  of  digital  euro  accounts,  operational  resilience  and  combating  fraud  (see 
Annex 12: applying Union data protection law to the digital euro).   

Options 2a-2e differ in terms of how personal data related to a digital euro user’s identity and 
transactions  are  processed  by  supervised  intermediaries  to  ensure  the  proper  functioning  of 
the  digital  euro.  Certain  activities  of  public  interest  are  common  features  for  all  options 

107 The G7 Public Policy Principles for Retail Central Bank Digital Currencies underlined that rigorous standards of privacy, accountability 
for the protection of users’ data, and transparency on how information will be secured and used is essential for any CBDC to command trust 
and confidence. 
108 The right to privacy and personal data protection are enshrined in Articles 7 and 8 of the Charter of Fundamental Rights of the European 
Union. 
109 See Eurosystem report on a digital euro 
110 See Eurosystem  report on the public consultation on a digital euro”. Among the requested features of a potential digital euro, privacy 
ranked highest for 43% of respondents.  
111  Cash  transactions  are  anonymous  in  that  they  do  not  reveal  the  identity  of  the  payer  and  the  payee.  However,  where  large  cash 
transactions  are  not  prohibited,  they  are  subject  to  customer  due  diligence  (CDD)  checks,  and  are  therefore  no  longer  anonymous.  Such 
threshold is set at 10.000 EUR at EU level, although some Member States have opted for lower thresholds.] 
112 Charter of Fundamental Rights of the European Union, OJ C 202, 7.6.2016, p. 389–405 
113 Anti-money laundering (AML), counter terrorist financing (CFT) and taxation are recognised as important public interests in the EU’s 
data protection framework.  

40 

 
 
 
                                                           
(except  option  2a).  For  example,  for  the  purposes  of  AML/CFT,  supervised  intermediaries 
distributing  the  digital  euro  would  act  as  obliged  entities  within  the  meaning  of  the 
AML/CFT Directive and would be responsible for the processing of personal data of users as 
required  under  the  AML/CFT  framework.114  For  the  purpose  of  taxation,  supervised 
intermediaries acting as payment service providers would be responsible for the processing of 
personal  data  of  users  to  combat  tax  avoidance.  For  the  purpose  of  payment  transactions, 
supervised intermediaries  would be responsible  for  the  processing personal  data of users  in 
order to manage transactions at the front end of the payments process. 

The  ECB/Eurosystem  would  process  categories  of  data  strictly  necessary  to  perform  its 
activities.115  The  ECB/Eurosystem  may  be  required  to  process  personal  data  to  validate 
transactions  at  the  back  end  of  the  payments  process  (payment  settlement).  The 
ECB/Eurosystem’s role in payment settlement is therefore a common feature in most options 
described  below  (except  Option  2a  and  Option  2d  for  offline  proximity  payments).  Clear 
segregation of personal data between supervised intermediaries and the ECB/Eurosystem, as 
well  as  privacy  enhancing  technologies  (PETs)116,  would  ensure  that  data  processed  by  the 
Eurosystem cannot be directly attributed to an identified digital euro user by the Eurosystem 
(see Annex 12: applying Union data protection law to the digital euro).   

To  preserve  the  privacy  of  users,  all  options  laid  down  below  (except  option  2a)  would 
mandate  intermediaries  to  provide  the  EU-wide  interoperable  European  Digital  Identity 
Wallet  (EUDIW)  as  one  option  for  on-boarding  and  payment  initiation  with  the  digital 
euro.117 In this respect, the European Digital Identity Wallet will provide a European tool that 
will  enable  users  not  only  to  disclose  only  those  data  points  that  they  need/wish  to  share 
(‘selective  disclosure’)  but  also  to  use  pseudonyms.  Further,  the  usage  of  the  European 
Digital Identity Wallet as proposed by the Commission will ensure compliance with the EU 
data protection requirements and the principle of data minimisation.118 

Option 2a: No processing of personal data related to a user’s identity or transactions  

Under this option, personal data related to a user’s identity and digital euro transactions are 
not processed by the ECB/Eurosystem or by supervised intermediaries. A user would neither 
be identified when opening a digital euro account (onboarding) nor when conducting digital 
euro transactions.  In terms  of AML/CFT requirements, the digital  euro  would be subject  to 
the cash treatment laid down in the AML/CFT package adopted by the Commission in July 
2021  (i.e.  an  upper  limit  of  EUR  10,000  for  large  transactions  in  cash119).  Supervised 
intermediaries  and  the  ECB/Eurosystem  would  not  identify  taxable  persons  neither  in  the 
case of transactions below national thresholds nor when the transacting parties fail to abide to 
requirements on self-declaration/notification of larger transactions. Moreover, intermediaries 
and  the  ECB/Eurosystem  would  not  identify  users  for  other  purposes  (e.g.  management  of 
operational ICT risks, payment fraud, funding and defunding).  

114 This includes carrying out the appropriate level of customer due diligence, reporting unusual and suspicious transactions, and the sharing 
of information by competent authorities as required under AMLD5 EUR-Lex - 32018L0843 - EN - EUR-Lex (europa.eu), and future AMLR 
EUR-Lex - 32015L0849 - EN - EUR-Lex (europa.eu)  
115 This would be limited to information strictly necessary for payment settlement, as well as aggregated information for statistical, research, 
supervisory and oversight purposes. 
116 PETs are technologies that eliminate or minimise personal data processing, thereby protecting informational privacy of a data subject, 
without causing the loss of the functionality of the information system. See EDPS Opinion 5/2018, Privacy by Design | European Data 
Protection Supervisor (europa.eu) 
117 See also the result of the public consultation where more than 50% of the professional stakeholders suggested  
118 See https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52021PC0281.  
119 Under the new AML/CFT package, the Commission proposes to introduce at EU level a maximum amount of €10,000 for large cash 
transactions. Member States will remain free to maintain lower limits at national level. 

41 

 
 
                                                           
Option 2a would provide a user with more privacy than cash (given that the identity of cash 
users is checked by supervised intermediaries when withdrawing or depositing cash). 

Option 2b: Processing of personal data related to user’s identity but not to transaction data  

Under  this  option,  personal  data  related  to  a  user’s  identity  would  be  processed  by  a 
supervised  intermediary  when  opening  a  digital  euro  account  (onboarding).  Personal  data 
related  to  a  user’s  identity  would  only  be  processed  exclusively  by  the  supervised 
intermediary  who  has  onboarded  the  user  for  specific  purposes  (e.g.  management  of 
operational  ICT  risks,  payment  fraud,  funding  and  defunding,  AML/CFT.  Taxation).  This 
includes, for example, obligations stemming from taxation law which are applicable to funds: 
the supervised intermediary who has onboarded the user would identify the user as a taxable 
person  under  national  thresholds.    However,  personal  data  related  to  a  user’s  payment 
transactions  are  not  processed  by  supervised  intermediaries  when  a  user  conducts  a  digital 
euro transaction.   

Option  2b  would  provide  a  high  level  of  privacy  and  data  protection  to  a  user  when 
conducting digital euro transactions. 

Option 2c: Processing of personal data related to users’ identity and transaction data  

Under  this  option,  personal  data  related  to  a  user’s  identity  and  digital  euro  transactions 
would  be  processed  by  supervised  intermediaries  subject  to  the  same  treatment  as  private 
electronic  payments  today.  This  means  that  personal  data  related  to  a  user’s  identity  and 
digital  euro  transactions  would  be  visible  to  and  processed  by  supervised  intermediaries  in 
accordance with the requirements of the GDPR and in compliance with AML/CFT, to fight 
fraud and for other lawful purposes (e.g. the management of operational ICT risks).120   

Option  2c  would  require  that  personal  data  related  to  a  user’s  identity  are  processed  by  a 
supervised  intermediary  when  opening  a  digital  euro  account  (onboarding),  in  line  with 
customer  due  diligence  (CDD)  requirements.  In  addition,  personal  data  related  to  a  user’s 
identity  and  digital  euro  transaction  data  would  be  processed  by  all  relevant  supervised 
intermediaries  (the  intermediary  of  both  the  sender  and  beneficiary  of  the  payment)  when 
conducting digital euro transactions.  

However, this option may include the possibility to apply simplified due diligence, reducing 
the  information  accompanying  certain  digital  euro  transactions  below  a  threshold,  where 
justified by a risk assessment as laid down in the AML package adopted in July 2021.121 In 
terms of AML/CFT requirements, a user of a digital euro would be subject to CDD treatment 
established for private payments (i.e. a supervised intermediary would need to identify a user 
for an occasional transaction that constitutes a transfer of funds  above EUR 1,000).122  The 
processing of personal data related to the user’s identity for other purposes (e.g. management 
of  operational  ICT  risks,  payment  fraud,  funding  and  defunding)  would  be  conducted  by 
supervised intermediaries.  

120  As  with  private  payments,  supervised  intermediaries  would  be  required  to  apply  customer  due  diligence  (CDD)  measures  on  a  risk-
sensitive basis, when establishing a business relationship, when carrying out an occasional transaction, or when there is suspicion of money 
laundering as set out in Article 11, Article 12 and Article 13 AMLD. 
121 In the case of simplified due diligence justified under a risk assessment, obliged entities would nevertheless be required to apply more 
stringent  due  diligence  where  needed,  in  keeping  with  the  risk-based  approach  underpinning  the  AML  framework.  This  means  that  the 
extent  of  the  monitoring  of  transaction  data  collected  on  clients  would  have  to  be  adjusted  on  a  case-by-case  basis,  which  would  not 
guarantee a high level of privacy as a sufficient transaction monitoring would have to take place.  
122 As defined in Article 11 AMLD. 

42 

 
 
                                                           
Option  2c  would  give  a  user  a  similar  level  of  privacy  and  data  protection  as  current 
electronic payments today.  

Option 2d: Processing of personal data related to users’ identity but not to transaction data for 
offline low-value payments – non-exclusive option 

Under  this  option,  a  user’s  personal  data  is  processed  by  a  supervised  intermediary  during 
onboarding.  Supervised  intermediaries  would  process  personal  data  related  to  a  user’s 
identity and digital  euro transactions  when they  conduct  online  digital  euro transactions  (in 
accordance with option 2c).  However, personal data would not be processed by supervised 
intermediaries  when  conducting  offline  digital  euro  transactions  below  a  certain  low  value 
threshold (which distinguishes it from options 2b and 2c). This would grant the user with a 
high level of privacy and data protection when conducting low-value digital euro transactions 
in  proximity  offline.  Consistent  with  the  AML  package123,  the  low  transaction  threshold 
would be determined and justified on the basis of an AML/CFT risk assessment, conducted 
by  the  EU  AML  Authority  (AMLA).  These  thresholds  would  be  introduced  by  means  of  a 
Commission  delegated  act  before  the  issuance  of  the  digital  euro.  Offline  digital  euro 
transactions  would  be  limited  to  proximity  payments  to  mitigate  money  laundering  and 
terrorist financing risks and technical measures would be taken to prevent the circumvention 
of established thresholds.  

Transactions  of  low-value  offline  transactions  would  be  settled  on  a  person-to-person  basis 
without  intermediation  by  an  intermediary  or  the  ECB/Eurosystem.  Neither  supervised 
intermediaries  nor  the  ECB/Eurosystem  would  therefore  process  data  for  low-value  offline 
transactions.  

Option 2d goes beyond the current baseline for electronic payments by offering users a level 
of privacy similar to  cash for low-value  offline  transactions.  Online  transactions would  still 
require processing of personal data in accordance with Option 2c.  

Option 2e: Processing of personal data related to users’ identity but not to transaction data for 
online low-value payments – non-exclusive option 

Under  this  option,  personal  data  related  to  a  user’s  identity  is  processed  by  a  supervised 
intermediary during onboarding. In addition, supervised intermediaries may process personal 
data  related  to  high  value  online  digital  euro  transactions  (in  accordance  with  option  2c). 
However, personal data related to a user’s digital euro transactions would not be processed by 
supervised intermediaries when conducting online low-value digital euro transactions below a 
threshold (which distinguishes it from option 2d). This would grant the user with a high level 
of  privacy  and  data  protection  when  conducting  low-value  online  digital  euro  transactions. 
This low value transaction threshold would have to be determined and justified on the basis 
of an AML/CFT risk assessment similar to the solution in Option 2d.  

Option 2e goes beyond the current baseline for electronic payments by offering users more 
privacy for conducting their online low-value transactions. High-value online transactions 
would require processing of personal data in accordance with option 2c. 

Table 2: Summary of privacy options 

123 https://finance.ec.europa.eu/publications/anti-money-laundering-and-countering-financing-terrorism-legislative-package_en 

43 

 
 
                                                           
Processing of 
personal data 
related to a user 
(Y/N) 

NO – to 
intermediaries 
NO – to ECB  

Processing of 
personal data 
related to 
transactions 
(Y/N) 
NO – to 
intermediaries 
NO – to ECB  

YES – to 
intermediaries 
NO – to ECB  

NO – to 
intermediaries 
YES -  to ECB 

Option 2a 

Option 2b 

Option 2c 

YES – to 
intermediaries 
NO – to ECB 

YES – to 
intermediaries 
YES – to ECB 

Option 2d 
Non 
exclusive 

Option 2e 
Non 
exclusive 

YES – to 
intermediaries 
(quantity of 
information 
depends on 
threshold) 
NO – to ECB 
YES – to 
intermediaries 
NO – to ECB 

NO – to 
Intermediaries  
NO – to ECB  

YES or NO – to 
Intermediaries 
(depends on 
transaction 
amount) 
Yes – to ECB 
(only for high 
level online 
transactions.) 

Outcome 

Neither ECB nor intermediaries identify the user; personal 
data  is  not  processed  when  onboarding  a  user;  personal 
data  is  not  processed  when  a  user  conducts  transactions 
fixed at a limit equivalent for large transactions in cash. 
 Personal  data  is  processed  exclusively  by  the  specific 
intermediary  onboarding  a  user;  personal  data  is  not 
processed  when a user conducts transactions. ECB  would 
settle  payment  transactions,  therefore  data  relating  to  the 
individuals would be processed. However, without directly 
identifying the individual. 
Personal  data  is  processed  by  all  relevant  intermediaries 
when  onboarding  the  user,  and  when  a  user  conducts 
transactions above  the  upper limit for a  transfer of  funds. 
ECB  would  settle  payment  transactions,  therefore  data 
relating  to  the  individuals  would  be  processed.  However, 
without directly identifying the individual. 
Personal  data  is  processed  by  all  relevant  intermediaries 
when  onboarding  a  user;  and  high  value  offline 
transactions  would  not  be  possible;  personal  data  is  not 
processed  by  the  ECB  or  intermediaries  when  a  user 
conducts low-value offline transaction.  

 Personal  data  is  processed  by  all  relevant  intermediaries 
when  onboarding  a  user  and  when  a  user  conducts  high 
value  transactions;  personal  data  is  not  processed  when  a 
user  conducts  low-value  online  transaction.  ECB  would 
settle  online  payment  transactions,  therefore  data  relating 
to  the  individuals  would  be  processed.  However,  without 
directly identifying the individual. 

5.2.3  Financial stability and credit provision 

Large-scale use of digital euro as a store of value might divert large amounts of deposits from 
commercial  banks  to  the  balance  sheet  of  the  Eurosystem.  Such  a  migration  of  deposits  to 
digital  euro  can  be  both  of  a  structural  nature  and  occur  in  times  of  crisis,  with  different 
implications for banks’ intermediation capacity and financial stability, and potential varying 
impacts for individual banks depending on their liability structure (see Annex 11 §3.2). These 
liability  structures  vary  widely  across  countries  in  the  euro  area  and  in  the  EU  (see  Annex 
11).  

A digital euro could thus negatively impact the financing of the real economy by banks and 
may  endanger  financial  stability  unless  offsetting  measures  are  adopted.124  In  a  similar 
fashion,  a  digital  euro  would  have  implications  on  capital  flows  and  the  central  bank’s 
balance sheet. 

Option 3a: Digital euro with unrestricted store of value function  

124 ECB’s preliminary analyses indicate that keeping total digital euro holdings between one trillion and one and a half trillion euro would 
avoid negative effects for the financial system and monetary policy. See Fabio Panetta’s opening remarks, ECON Committee, June 2022. 

44 

 
 
 
 
                                                           
Under this option, people and businesses could hold as much digital euro as they desire and 
any  possible  remuneration  (i.e.  interest)  connected  to  holding  digital  euro  would  be 
irrespective of the amount held.  

Option 3b: Possibility of introducing limits to the digital euro’s store of value function 

This option would allow for the introduction of measures, providing for clear objectives and 
criteria for them, to mitigate risks to  financial stability and credit provision that could  arise 
from  large-scale  deposit  conversion  into  digital  euro.  For  instance,  if  justified  within  the 
framework established by the legislature, the Eurosystem could set proportionate ceilings on 
individual digital euro holdings (‘holding limits’) or on the amount of deposits per user to be 
converted to digital euro within a given time period (‘conversion limits’) for both people and 
businesses,  insofar  as  this  is  warranted  to  safeguard  credit  provision  to  the  economy  and 
ensure financial stability. Excessive digital euro holdings could also be disincentivised, if this 
is  justified  and  proportionate  (i.e.  if  there  are  no  less  restrictive  alternative  measures)  by 
imposing for instance less favourable interest rates on holdings above certain thresholds.  

The specific tools to limit the digital euro’s store of value function would be flexibly defined, 
employed and calibrated by the Eurosystem, on the basis of the Regulation. The Regulation 
would provide for the possibility to employ such tools and set clear objectives and criteria for 
their  operational  use  by  the  Eurosystem,  as  part  of  its  role  in  supporting  financial  stability. 
This  would  guarantee  the  strict,  justified  and  proportionate  use  of  these  tools  for  their 
intended  purpose,  while  giving  the  Eurosystem  the  necessary  flexibility  to  adapt  them 
through  time  to  the  prevailing  and  changing  circumstances,  including  the  level  of  excess 
reserves in the financial system. In terms of accountability, the Regulation would require the 
ECB to provide, periodically, any necessary explanation and analysis to the Commission, the 
Council, and the European Parliament, justifying the use of a tool and its parameters. 

Criteria for the definition and use of the tools would include inter alia their proportionality to 
the  objective  of  safeguarding  financial  stability,  their  non-discriminatory  and  uniform 
application across the euro area, and the requirement to not unduly alter the free competition 
within  the  retail  payment  market.  Furthermore,  limits  to  the  digital  euro’s  store  of  value 
function should not constrain the payment functionality sought by users, . For this purpose, 
mechanisms to ensure that e.g. individual holding limits do not stand in the way of a digital 
euro  transaction,  both  on  the  payer’s  and  the  payee’s  end,  are  being  explored  by  the  ECB. 
This  includes  so  called  ‘waterfall’  and  ‘reverse  waterfall’  mechanisms,  whereby  payments 
surpassing holding limits would be accepted while triggering an automatic transfer to or from 
a private payment account (e.g. bank or e-money account). That is, when a payee receives a 
digital  euro  payment  that  results  in  a  balance  above  the  holding  limit,  the  excess  amount 
would automatically be transferred to the user’s linked private payment account (‘waterfall’ 
mechanism). Similarly, when a payer wants to transfer higher amounts in digital euro than the 
maximum holding amount, an automatic conversion of private money funds from the linked 
payment  account  can  automatically  be  initiated  to  allow  the  transfer  (‘reverse  waterfall’ 
mechanism).  Both  mechanisms  would  be  specified  in  the  Regulation  as  they  are  essential 
elements  to  the  use  of  the  digital  euro  as  a  means  of  payment,  though  the  use  of  these 
mechanisms would remain a choice of the digital euro users. 

5.2.4  International use 

Cross-border  payments  in  digital  euro  across  euro  area  member  states  will  be  an  inherent 
characteristic of the digital euro. In addition, in order to achieve specific objectives 1 and 2, 
the Regulation will provide that a digital euro could be used for payment transactions beyond 
the  euro  area  and  beyond  the  EU.  The  international  use  of  the  digital  euro  would  also  be 

45 

 
 
subject  to  arrangements/agreements  between  the  ECB  and  the  respective  central  banks  in 
non-euro area countries and bilateral agreements between the Union and third countries.  

While  a  digital  euro  has  the  potential  to  facilitate  trade  and  cross-border  payment,  it  also 
carries risks to the financial stability of the euro area (for instance, as a strong international 
use  of  the  digital  euro  could  significantly  expand  the  Eurosystem  balance  sheet)  as  well  as 
risks to the financial stability and the monetary sovereignty of non-euro area countries. This 
potential for spillovers to other countries from overseas access to a jurisdiction’s CBDC has 
led the G7 to caution about a wide international use of CBDC.125  

In any event, the digital euro would need to be successful first within the euro area and only 
after that expand to international use. For the foreseeable future, the key driver for achieving 
specific objectives 1 and 2 and for impacts, is the use of the digital euro within the euro-area. 
Given the many uncertainties, a prudent, step-wise approach with respect to international use 
would be preferable. However since the actual use depends on agreements to be signed with 
non-euro  area  countries,  no  precise  timeline  can  be  established.  The  policy  options  are 
presented and analysed in Annex 9. 

5.3  Options discarded at an early stage 

Option 2a: No processing of personal data related to a user’s identity or transactions 

Option  2a  would  offer  a  high  level  of  privacy  but  could  undermine  the  applicable  and 
upcoming rules addressing money laundering and terrorist financing risks. The  Union’s and 
FATF objectives ban anonymous accounts (Article 10 of AMLD 5). Article 58 of the AML 
regulation  proposal126  which  forms  part  of  the  legislative  package  adopted  in  July  2021 
proposes to extend that prohibition to digital wallets.127 

Option 2a also does not take into account the risk profile of a digital euro, which is different 
from cash. As emphasized by FATF,128 CBDCs could present greater ML/FT risks than cash 
as they would be acting as an instrument with the liquidity and privacy level higher then cash 
but  without  the  limitations  on  portability  that  come  with  physical  cash  unless  their  use 
(holdings,  transaction  values)  will  be  limited.  As  the  combination  of  high  level  of  privacy, 
portability  and  likely  mass  adoption  would  not  allow  for  AML  checks,  this  option  would 
undermine  the  Union  policy  and  entail  reputational  risk  for  the  ECB  as  issuer  of  a  digital 
currency. 

Moreover, setting limits to the use of a digital euro, which could be desirable from a financial 
stability perspective to limit its potential use as a form of investment, would not be possible 
in  a  context  of  option  2a.  Therefore,  Option  2a  would  not  be  consistent  with  Option  3b 
outlined above. In addition, Option 2a would provide for a less stringent AML/CFT regime 
than cash while risks are much higher according to FATF129 and evidenced in the answers to 
the  Commission  targeted  consultation.130  While  option  2a  will  provide  for  higher  level  of 

125 The G7 Public Policy Principles for Retail Central Bank Digital Currencies 
126 COM(2021) 420 final 
127  “Credit  institutions,  financial  institutions  and  crypto-asset  service  providers  shall  be  prohibited  from  keeping  anonymous  accounts, 
anonymous passbooks, anonymous safe-deposit boxes or anonymous crypto-asset wallets as well as any account otherwise allowing for the 
anonymisation  of  the  customer  account  holder.  Owners  and  beneficiaries  of  existing  anonymous  accounts,  anonymous  passbooks, 
anonymous safe-deposit boxes or crypto-asset wallets shall be subject to customer due diligence measures before those accounts, passbooks, 
deposit boxes or crypto-asset wallets are used in any way”. 
128 Virtual assets - FATF report to G20 on so-called stablecoins, June 2020.  
129 FATF report to G20 on virtual assets, see discussion of option 2b in Part 7.2.2 for further details.  
130 See Annex 2 

46 

 
 
                                                           
privacy  than  cash,  in  contrast,  the  identity  of  users  is  monitored  when  depositing  or 
withdrawing cash.  

In addition to AML/CFT checks, supervised intermediaries would also not be in a position to 
perform  other  activities  that  require  the  processing  of  personal  data  (e.g.  taxation, 
management of operational ICT risks, payment fraud). This option is also not consistent with 
the need for the ECB to process personal data for settlement purposes. 

6  WHAT ARE THE IMPACTS OF THE POLICY OPTIONS AND HOW DO THEY 

COMPARE? 

This section outlines impacts of the policy options related to the digital euro. Given the lack 
of observable and forecastable impacts, both the ECB and the Commission, with the help of 
the  Joint  Research  Center,  used  scenario  analyses.  Scenarios  were  developed  based  on 
professional  judgement  and  their  impacts  quantified  based  on  modelling  and  statistical 
techniques. For more on the scenario analyses, please see Annex 11. 

6.1 

Baseline – no digital euro 

As  the  role  of  cash  seems  to  be  decreasing  in  the  digitalising  economy,  the  usage  of 
central  bank  money  could  be  more  and  more  replaced  by  private  money  and  private 
electronic means of payment. The observed decline in the use of cash in payments can be 
expected  to  continue  in  the  coming  years  with  the  expansion  of  e-commerce  and  the 
availability of more and more comfortable and cheaper electronic means  of payments.  This 
will reduce the role of central bank money as monetary anchor. Beyond a certain point, the 
trend of declining cash usage could endanger the sustainability of the cash infrastructure and 
hamper  the  provision  of  adequate  cash  services.  European  citizens  would  thus  encounter 
difficulties in accessing the only means of payment that is provided by the public sector and 
that provides unique features of central bank money. 

Private money cannot perform the core function of central bank money as an anchor of 
the  payments  and  monetary  system.  The  lack  of  a  monetary  anchor  i.e.  one-to-one 
convertibility of private money to central bank money usable in the digital economy,  could 
eventually  weaken  trust  towards  private  money  and  the  financial  system.  Without  central 
bank  money  to  provide  an  undisputed  monetary  anchor,  people  would  have  to  monitor  the 
safety  of  private  money  issuers  in  order  to  value  each  form  of  money,  undermining  the 
singleness of the currency. Predicting how trust in the euro would erode in the absence of a 
CBDC  is  not  possible  and  difficult  to  quantify.  The  impact  of  such  an  unfavourable 
development on the EU’s economy is even less quantifiable but potentially huge and difficult 
to reverse. Furthermore, relying on payment services provided entirely by the private sector 
would also mean having no backstop in case of operational failures or other causes of service 
interruptions.  Lastly,  not  offering  a  public  alternative  to  private  digital  means  of  payments 
could have adverse effects on financial inclusion.   

Private  money  cannot  solve  all  the  problems  and  reach  the  objectives,  especially  to 
support  innovative  payments  for  Industry  4.0  and  Web3.  Private  payment  solutions  for 
conditional payments in a tokenised economy (industry 4.0 and web 3) are stablecoins and, to 
a  lesser  degree,  commercial  bank  money  tokens.  Both  categories  of  private  solutions  lack 
interoperability, fungibility and reliability to support the tokenised economy of industry 4.0 
and web 3 absent a public alternative. Leaving the development of payment solutions entirely 
to  the  private  sector,  without  a  digital  euro  as  monetary  anchor,  would  carry  the  risk  of  a 
fragmented  outcome  across  the  euro  area.  As  indicated  in  Annex  8,  such  private  solutions, 

47 

 
 
alone, without a digital euro as public alternative would be more likely to (i) carry credit risks 
and  (ii)  increase  market  concentration  and  reduce  competition.  Commercial  bank  money 
tokens carry different credit risks depending on the bank issuing them. Stablecoins, too, carry 
specific systemic risks depending on the assets used to peg their value. The recent collapse of 
US  pegged  stablecoins  suggests  that  the  stability  of  private  payment  solutions  is  doubtful. 
Stablecoins  are  finally  also  predominantly  pegged  to  the  USD  which  creates  risks  for 
monetary policy (dollarisation).  

Other  regulatory  measures  can  help  improving  the  payment  market  in  the  EU  but 
cannot  offer  public  money  for  payments  in  the  digitalising  economy.  SEPA  created 
common  schemes  for  credit  transfers  and  instant  credit  transfers  within  the  European 
Economic Area. These schemes contributed to the creation of a single euro payments market 
in Europe by making it possible for consumers to rely on just one payment account to make 
euro credit transfers, including instant credit transfers, not only in their own country, but also 
in  an  area  larger  than  the  European  Union.  The  PSD2  and  its  ongoing  review  aimed  to 
address  barriers  to  new  types  of  payment  services,  such  as  payment  initiation  services  and 
account information services, and improve the level of consumer protection and security. The 
regulation  on  Instant  Payments  will  significantly  increase  speed  and  convenience  for 
consumers,  for  example  when  paying  bills  or  receiving  urgent  transfers  (e.g.  in  case  of 
medical emergency). In addition, they help to significantly improve cash flow, and bring cost 
savings  for  businesses,  especially  for  SMEs,  including  retailers.  These  measures  make 
payments with commercial money more efficient, safer, and faster in the EU. Nevertheless, 
they  all  concern  commercial  money  and  payment  systems.  Commercial  bank  money 
benefited  from  trust  due  partly  to  its  one-to-one  convertibility  to  central  bank  money.  This 
trust may be at risk if this convertibility is only limited to cash, which is less and less usable 
in a fast-digitalising society. 

The  monetary  policy  instruments  of  the  ECB  can  address  some  of  the  problems  and 
objectives but lacking a digital euro, a possible wide acceptance of a means of payment 
or store of value not denominated in euro in the future could weaken or even impair the 
transmission of monetary policy in the euro area. It would also have unclear implications 
for financial intermediation and cross-border capital mobility, which could ultimately affect 
financial stability. 

MICA will reduce risks related to global stablecoins but is not aimed at addressing the 
problem  set  out  in  this  impact  assessment.  Crypto-assets  that  stabilise  their  value  by 
referencing  other  assets,  be  it  a  single  official  currency  (e-money  token)  or  any  other 
asset/basket of assets (asset-referenced tokens), have a potential to be widely used as a means 
of  exchange  which  may  in  the  case  of  asset-referenced  tokens  and  e-money  tokens 
denominated in non-EU currency pose the risks to the smooth operation of payment systems, 
monetary  policy  transmission  or  monetary  sovereignty.  MICA  addresses  these  risks  by 
limiting  the  extent  to  which  asset-referenced  tokens  and  e-money  tokens  denominated  in  a 
non-EU currency may be used as means of exchange, including by giving the ECB the power 
to limit or stop the issuance of those tokens.  

As  a  conclusion,  the  existing  and  planned  measures  can  promote  private  digital  means  of 
payment, however, they cannot ensure continued availability  and use of public/central bank 
money when citizens and businesses decide to use more and more digital means of payment. 
Private solutions cannot fulfil this demand either. 

48 

 
 
6.2 

Establishing and regulating the digital euro 

Establishing  a digital  euro  would  make  it  possible  for  the  Eurosystem  to  issue  central 
bank  money  in  digital  form  for  general  use  by  people  and  businesses.  The  Regulation 
would enable the Eurosystem to issue central bank money in digital form. This would ensure 
that  the  central  bank  issued  euro  can  remain  usable  in  the  digitalised  economy  and  society 
and  thus  can  support  the  European  people  and  businesses.  A  digital  euro  would  thus 
effectively  reach  the  general  objective  and  –  with  the  right  design  –  support  the  specific 
objectives.  

A digital euro would have a number of specific benefits for and potential impacts on different 
stakeholders,  for  example  in  relation  to  availability  and  usage  of  central  bank  money, 
financial  stability,  privacy  and  personal  data  protection,  anti-money  laundering.  As  these 
effects would be influenced by a number of regulatory and normative choices, the impacts are 
analysed  in  the  following  sections  by  setting  out  specific  options  for  these  choices,  before 
coming back at the end to the overall impact of the digital euro (section 7.2). 

Non-financial industry representatives call for a digital euro because a digital euro in industry 
4.0 and web 3 would guarantee market  stability,  avoid  market  fragmentation  and safeguard 
European  monetary  sovereignty.  In  the  public  consultation,  stakeholders  expressed  that  a 
digital euro is needed to support innovative payment solutions in the private sector especially 
the possibility to program conditional payments as a crucial and attractive feature.  

6.2.1  Access and Usability  

Legal tender status 

Option 1a: Digital euro without legal tender status  

Without legal tender status, acceptance of a payment in digital euro would be fully voluntary 
for merchants. The payees (merchants) and distributors (PSPs) may decide to only invest in 
an infrastructure when they perceive a high demand from users, unless the comparative costs 
of accepting the digital euro against other electronic payments are clearly lower. Even if users 
would  see  benefits  in  the  digital  euro  such  as  privacy,  low  cost  and  fast  transactions,  their 
demand for payments in digital euro might remain low until a wide acceptance infrastructure 
is available. This would be detrimental to the development of network effects and use of the 
digital euro. 

Option  1a  would  only  partially  fulfil  the  general  objective  (enabling  payments  with  central 
bank money in the digital  age)  as it would  not  allow to  fully  reach  specific  objectives  (see 
section  that  aims  at  ensuring  that  central  bank  money  remains  available  and  accepted  by 
everyone  in  the  digital  sphere),  as  this  option  does  not  guarantee  the  wide  availability  and 
acceptance of the digital euro. Without legal tender status, the drivers of acceptance would be 
comparable to all other electronic private payment solutions where payees decide whether to 
accept a particular payment method as a means to discharge payment obligations, e.g. based 
on level of fees and convenience. A wide acceptance might prove difficult to achieve should 
the digital euro not have legal tender status as it takes time, cost, and effort for users to adopt 
a new payment method.  

49 

 
 
This  was  evidenced  in  the  Kantar  survey  commissioned  by  the  ECB,131  where  participants 
expressed “a strong preference for payment methods with pan-European reach and universal 
acceptance  in  physical  shops  and  online”.  No  legal  tender  status  may  limit  incentives  for 
merchants to invest in the necessary infrastructure to accept payments in digital euro. Lacking 
a  wide  acceptance  of  the  digital  euro  by  payees,  adoption  and  use  of  the  digital  euro  by 
payers  cannot  be  guaranteed.  Issuance of  a digital  euro without granting legal  tender status 
could thus result in a limited take-up by users.  

Under  Option  1a,  a  digital  euro  without  legal  tender  status  would  not  carry  any  mandatory 
compliance  costs,  as  its  use  would  be  voluntary.  The  overall  cost  would  depend  on  the 
business  decision  of  merchants  and  PSPs,  which  might  decide  to  accept  and  distribute  the 
digital  euro.  Since  neither  the  acceptance  nor  the  distribution  would  be  mandatory  for  any 
business, their decision would be entirely based on commercial considerations.  It should be 
noted,  however,  that  high  one-off  and  running  costs  could  deter  PSPs  and  businesses  from 
offering and accepting digital euro services, all the more if the digital euro take-up by users is 
uncertain (see more details under Option 1b) or slow132. 

Option 1b: Digital euro with legal tender status, including general mandatory acceptance by 
payees  

With the introduction of a digital euro with legal tender status, people and businesses would 
benefit  from  an  additional  choice  to  pay  in  central  bank  money  in  electronic  form  (e.g.  at 
POS or e-commerce) that would be accepted throughout the euro area. ECB market research 
has  shown  that  the  option  to  pay  anywhere  and  to  anybody  with  a  digital  euro  is  the  most 
valuable feature for citizens, differentiating it from existing payment instruments. Also, it is a 
means of payment that merchants would be happy to accommodate as long as broad adoption 
by  consumers  could  be  ensured.133  This  was  also  confirmed  by  the  Commission’s  public 
consultation.134 

Legal tender is a usual attribute of official currencies in the relevant territory (as a liability of 
the  central  bank).  For  some,  legal  tender  status  is  an  essential  and  inherent  element  of  a 
CBDC.135 In addition, “robust legal tender provisions can ensure that the use of the national 
currency is favoured in domestic payments”136, as opposed to third country CBDCs or non-
euro denominated stablecoins. This has led the ECB as well to consider a legal tender status 
as a desirable feature of the digital euro.137 The legal tender status of the digital euro would 
be an essential factor in  payment decisions of people and businesses as  it would imply that 
the  digital  euro  would  have  to  be  accepted  widely  by  payees  and  in  particular  merchants. 
According to the Kantar survey138, this is a crucial aspect for the general public and the tech-

131 Study on New Digital Payment Methods, Report March 2022 
132 Payments is a two-sided network industry featuring positive adoption externalities, meaning that a user joining the network brings 
benefits that accrue to others in the network. In other words, the value of a payment service to a provider or end user increases with the 
number of other participating providers or end users. When these positive effects are not internalized, market demand tends to be too low at 
any price, hence the equilibrium network size is smaller than the socially optimal network size, and even a perfectly competitive equilibrium 
is not efficient. 
133 Study on New Digital Payment Methods, Report March 2022 
134 As BEUC (European consumer organisation) put it, “it is necessary to maintain public access to and full usability of central bank money 
at the time of developing electronic payment”. In the Commission’s targeted consultation EU citizens ranked the wide availability, easy on-
boarding and use, ability to pay offline, anywhere to anyone, instant settlement and cost free features as very important or important. 
135 As the European Payment Council (EPC) put it in its answer to the Commission’s public consultation, “legal tender seems inherent to the 
concept of the digital euro”. IMF staff defined CBDC as “a new form of money, issued digitally by the central bank and intended to serve as 
legal tender.”  IMF Staff, 2018, Casting Light on Central Bank Digital Currency,  IMF, SDN/18/08 and  IMF  Working paper (WP/20/254) 
“Legal Aspects of Central Bank Digital Currency: Central Bank and Monetary Law Considerations”, W. Bossu and alii.  
136 See BIS Annual Economic Report, June 2021, CBDCs: an opportunity for the monetary system 
137 Report on a digital euro, ECB, October 2020  
138 Study on New Digital Payment Methods, Report March 2022 

50 

 
 
                                                           
savvy:  “Universal  acceptance  was  considered  the  most  important  feature  –  ideally,  across 
the euro area, all merchants in physical and online stores would need to accept it, regardless 
of  the  size  of  the  purchase.”  Such  a  universal  acceptance,  which  would  replicate  the 
acceptance  model  of  cash,  is  described  as  a  possible  leveraging  factor  leading  to  the 
improved  financial  inclusion  of  the  unbanked  population  in  the  Kantar  survey.  “The  new 
method  should  be  as  easy  to  use  as  possible  and  still  provide  the  same  control  as  cash.  It 
should  also  be  accessible  around  the  clock  and  be  accepted  in  any  shop.”  People  and 
businesses could benefit from a wide acceptance network and thus have a real choice to pay 
with central bank money in a digital way. In legal terms, granting the digital euro the status of 
legal tender is sound and would seem  logical. Option 1b, i.e. granting legal tender status to 
the digital euro with a general mandatory acceptance of digital euro payments for payees139, 
would be effective in meeting the general and both specific objectives.  

- 

- 

In  terms  of  general  objective,  the  issuance  of  a  digital  euro  would  ensure  that  the 
central  bank  money  issued  by  the  ECB  can  also  meet  payment  needs  in  the  digital 
age. 
In  terms  of  specific  objective  1,  the  legal  tender  status,  which  implies  mandatory 
acceptance, would guarantee wide acceptance by payees of the digital euro and hence 
enable wide usage of the digital euro for payments in the digital economy. However, 
the  actual  use  of  the  digital  euro  will  also  be  determined  by  other  factors,  such  as 
convenience for consumers compared to other means of payment, while its effective 
success  will  also  depend  on  factors  such  as  charges  for  merchants.  Granting  legal 
tender  status  to  the  digital  euro  would  further  support  the  use  of  the  euro  in  a 
digitalised economy.140 

-  Likewise, if the digital euro has a mandatory acceptance and thus a strong acceptance 
network, reaching specific objective 2, i.e. maintaining the dominance and use of euro 
vis-à-vis non-euro denominated stablecoins and foreign CBDCs, would also be more 
effectively achieved than under Option 1.a. Granting legal tender status to the digital 
euro  could  thus  help  avoiding  that  foreign  CBDCs  or  non-euro  denominated 
stablecoins  result  in  currency  substitution,  provided  charges  to  consumers  remain 
low.141 This would tend to ensure a convergent use of the euro as the single currency 
of the euro area. 

On the other hand, granting legal tender to the digital euro may negatively impact payment 
services providers’ current business with private means of payment, as the legal tender status 
may foster the acceptance of the digital euro to the detriment of private means of payment. In 
that respect, some payment service providers pointed to the “unlevel playing field” between 
the  digital  euro  and  private  means  of  payment,  should  a  legal  tender  be  introduced.142 
However, the digital euro with legal tender status is  an official currency and has a different 
nature than private means of payment. The future market position of the digital euro will not 
only  depend  on  its  acceptance  network,  but  several  other  characteristics  as  well,  such  as 
convenience  and  payers’  fees.  In  addition,  payment  service  providers  could  benefit  from 

139  Under this option 1b, mandatory acceptance would not apply to natural persons acting in the course of a purely personal or household 
activity.  
140 See Annex 8 on the evolution of the internet and payment needs of industry 4.0. 
141 The Legal tender status is also in other jurisdictions seen as a key attribute of CBDCs.  One of the more advanced CBDC projects – e-
CNY in China – has received legal tender status. In Sweden, the Riskbank has proposed that e-krona be made legal tender “to give the e-
krona  a  strong  position  and  ensure  that  it  becomes  established  and  accepted  by  the  market”  (Sveriges  Riksbank  (2019):  “The  Riksbank 
proposes  a  review  of  the  concept  of  legal  tender”,  press  announcement;  The  Riskbank’s  e-krona  project,  Report  2,  October  2018.  “Put 
simply,  a  trader  should  not  be  able  to  discriminate  against  a  digital  payment  with  state  e-krona  if  they  otherwise  accept  private  digital 
money”).  
142 See Annex 2 for a summary of the public consultation  

51 

 
 
                                                           
distributing the digital euro, which would be widely accepted due to the legal tender status. 
Benefits  include  additional  income  from  value  added  services,  potential  expansion  of 
customer base  and potential  revenues  generated  on the merchant  side.  ‘Level  playing field’ 
issues  are  unlikely  to  materialise  if  merchants  will  have  to  accept  the  digital  euro,  as  they 
generally  accept  a  mix  of  payment  means,  including  more  expensive  means  of  payment  in 
order  to  satisfy  their  customers  (must-take  nature  of  certain  payment  means).  On  the  other 
hand,  mandatory  acceptance  carries  the  risk  that  intermediaries  overcharge  merchants  for 
digital euro payment services if the pricing is left to the market, given that merchants would 
have no choice but to accept digital euro payments.  

In  terms  of  costs,  a  digital  euro  with  legal  tender  status  would  require  the  necessary 
infrastructure throughout the euro area for payees to be able to accept the digital euro in all 
forms, i.e. both online and offline.  

Overall, the level of costs incurred by PSPs will depend on the design of the digital euro and 
factors  such  as  the  possibility  of  reusing  existing  payment  infrastructure,  the  exact  role  of 
intermediaries in the digital euro ecosystem (e.g. opening and managing accounts, settlement 
of transactions, provision of the end-user interface, acquiring, dispute resolution), the options 
or eventual obligations for PSPs to distribute the digital euro (e.g. mandatory requirement for 
all or part of the PSPs to distribute the digital  euro), the design of the compensation model 
(e.g. free basic uses for  private individuals, Eurosystem compensation to PSPs, scheme and 
processing fees, merchant fees, potential fees charged by smart phone operators for hosting 
wallets of PSPs) the possibility to grant access to ancillary services, the possibility to expand 
more easily into other national  markets  in  the euro area,  and the share  of PSPs deciding to 
voluntarily offer such services (which depend on several of the factors listed above, and also 
the actual demand for digital euro). The PSPs might need to cover the cost of expanding their 
current business processes, including developing and running the customer facing interfaces, 
onboarding  of  customers,  managing  accounts  and  transactions,  providing  payment  tools, 
checking compliance.  

Original  Equipment  Manufacturers  (OEMs)  of  mobile  devices  such  as  smartphones  could 
charge  PSPs  a  per  transaction  fee  on  digital  euro  transactions  for  storing  software  on 
hardware components of mobile devices like secure elements. A secure element is a tamper-
resistant  hardware  and  platform  which  is  separate  from  the  Operating  System  of  a  mobile 
device and the device’s processor/chip. Secure elements securely host applications and their 
confidential  data  in  accordance  with  rules  set  by  trusted  authorities.  Secure  elements  are 
similar  to  a  smart  card  in  a  mobile  phone  and  provide  the  highest  level  of  security  for 
applications residing on it. Access to secure elements of OEMs is in particular necessary to 
store tokenised primary account numbers (PANs) which are needed to authorise payments.  

In  the  Commission’s  targeted  consultation,  35%  of  professionals,  especially  financial 
intermediaries, reported that PSPs would face potentially considerable one-off costs and less 
than  one  fifth  anticipated  considerable  recurrent  costs.  Expected  costs  in  connection  to  a 
digital euro mostly relate to the deployment of new distribution channels, expansion of PSPs 
account  management  systems  (both  hardware,  software),  IT  connections  to  the  ECB  and 
legacy  systems,  customer  support,  scheme  fees,  transaction  processing,  KYC/AML,  fraud 
management,  payment  guarantee,  accounting,  back-office,  training  and  marketing.  Most  of 
these  functions  are  already  in  place  for  existing  payment  solutions,  but  the  expansion  of 
services,  especially  opening  and  managing  new  accounts  might  require  additional 
investments  from  PSPs.  Nevertheless, some of the costs listed by PSPs above (e.g. scheme 
fees  if  Eurosystem  covers  them)  might  not  occur  eventually  and  many  other  functions  are 

52 

 
 
already  in  place  and  may  not  need  additional  investments.  Most  professional  respondents 
pointed out the difficulties in estimating future costs owing to large uncertainties as regards 
the  design  of  the  digital  euro  and  the  possibility  to  reuse  existing  banking  and  payment 
infrastructures (e.g. SCT Inst). 

Nevertheless, one may  attempt to provide a very basic one-off adjustment cost estimate for 
PSPs, based on the recent Commission Impact Assessment on Instant Payments.143 The basis 
for such an estimate is the similarity of actions necessary for PSPs to provide services based 
on a new payment scheme.144 The total one-off adjustment costs for SEPA instant payment 
are  reported  by  PSPs  to  fall  in  the  range  of  EUR  10,000  to  EUR  1.3  million  per  PSP.145 
Considering  the  total  number  of  5,242  institutions  providing  payment  services  in  the  euro 
area,146  the  overall  one-off  costs  of  providing  digital  euro  services  for  these  PSPs  can  be 
estimated  to  amount  to  up  to  EUR  6.8  billion.    This  can  be  considered  as  a  conservative 
estimate, as the actual costs of smaller PSPs will fall in the smaller end of the range. Indeed, 
if  one  follows  the  estimation  method  applied  in  the  Commission  Impact  Assessment  on 
Instant  Payments,  namely  by  grouping  PSPs  into  two  size  groups  (total  assets  above  and 
below EUR 1 billion), applying a smaller cost estimate for smaller PSPs, the cost for all PSPs 
can be estimated to amount to up to only EUR 3.6 billion147.  

It is not possible to estimate the recurrent costs of providing digital euro services at this stage 
due to uncertainties as regards implementation details and the actual future digital euro usage. 
In addition, one may also need to consider the provision of acquiring services to merchants, 
which  is  a  specific  service  and  is  expected  to  be  offered  by  only  a  subset  of  PSPs.148 
However,  the  related  one-off  and  recurrent  costs  are  also  not  possible  to  estimate  due  to 
unavailability of data. At the same time, (acquirer) PSPs will recover their costs via merchant 
fees (as the case with existing payment means) and additional fees coming from value added 
services build on the digital euro (e.g. conditional payments). 

For merchants to accept payments in digital euro, new POS terminals, new software or new 
app-based POS solutions may be needed, and/or integration with existing infrastructure may 
need  to  be  developed.  The  cost  of  the  acceptance  for  merchants  in  the  euro  area  was 
estimated  in  two  ways  using  two  sources  of  information,  i.e.  the  targeted  consultation  and 
ECB’s  discussion  with  market  experts.  The  costs  calculated  based  on  the  targeted 
consultation  results  in  a  wide-range  estimate.  The  estimates  received  from  the  ECB,  while 
falling within the range resulting from the targeted consultation, is a narrower range estimate, 
which  also  indicates  that  the  real  cost  can  be  at  the  lower  end  of  the  estimates  from  the 
targeted consultation. 

In the Commission targeted consultation, merchants and PSPs reported that it was impossible 
to  predict  future  costs  of  the  acceptance  of  payments  in  digital  euro  as  the  details  of  the 
design of the digital euro are still unknown. Costs are also very dependent on the individual 
merchant  profile. Companies that already  accept  digital  means of payments  will face lower 

143 Link to be provided after the adoption of the IP proposal and publication of the IP IA. 
144 See Box 2 in the Commission Impact Assessment on Instant Payments. Notable that an important one-off cost item, the setting up of the 
24/7/365 operation would not have to be redone for the digital euro – hence this estimate is conservative. 
145 The data for instant payments had its own limitations. The limited number of observations, and the wide range of estimates (which is not 
hard data) calls for a necessary caution.  
146 2021 data, ECB Payment statistics. https://sdw.ecb.europa.eu/reports.do?node=1000004051 
147 The share of the two size groups were estimated based on a sample of 2,886 PSPs that adhere to the SEPA credit transfer scheme, and 
whose total assets data was available in the ORBIS database. As a result, it was assumed that 53.6% of the relevant institutions had total 
assets  below  1  billion  euro.  As  per  the  Commission  Impact  Assessment  on  Instant  Payments,  for  the  lower  bucket,  the  range  of  one-off 
compliance costs reported was EUR 10 000 to EUR 143 000, while for the upper bucket the range was EUR 100 000 to EUR 1.3 million. 
148  Fewer  than 400 acquirers  were  active  in  Europe  in  2018.  Europe's  biggest  Merchant  Acquirers  by  volume  -  Payment  Card  Yearbook 
(paymentscardsandmobile.com) 

53 

 
 
                                                           
setup  costs  compared  to  those  not  accepting  digital  means  of  payments.  Nevertheless,  few 
professional  respondents  (PSPs,  merchants)  provided  an  estimate  of  the  incremental  costs 
necessary  to  accept  payments  in  digital  euro.  The  ranges  are  summarized  below,  however, 
given the uncertainty around the exact  needs and  the very low response  rate, it needs to  be 
treated with caution. 

Table 3. Merchants’ possible costs related to the acceptance infrastructure of payments 
in digital euro149 

Merchants already accepting 
electronic payments 

One off costs related to (new) POS terminals for 
accepting payments in digital euro : 
One-off costs related to software: 
Annual cost for maintenance, licences etc. 
Source: European Commission targeted consultation on a digital euro, 2022. 

In EUR per terminal 
50-500 

10-500 
Insignificant – 100 

Merchants not yet 
accepting electronic 
payments 
In EUR per terminal 
100-1000 

100-500 
Insignificant – 100 

Based on the targeted consultation data in Table 3 and considering that end 2021 there were 
around 13.5 million POS terminals in the euro area (as reported by the ECB150), the total one-
off  costs  (both  hardware  and  software)  for  all  merchants  already  accepting  electronic 
payments could range between EUR 0.8 and 14 billion.151 As regards annual recurrent costs, 
for maintenance and licences, calculating with a mid-range average of EUR 50 per terminal 
would result in annual running costs of about EUR 0.7 billion.   

The  potential  cost  for  merchants  not  accepting  electronic  means  of  payments  can  only  be 
roughly estimated. According to the SPACE study of the ECB152 from 2022, it was possible 
to pay with non-cash payment instruments in 81% of reported transactions. This means that 
in  slightly  less  than  one  in  five  transactions  only  cash  was  accepted.  Calculating  with  13.5 
million POS terminals in the euro area representing 81% of transactions,153 and a middle of 
the  estimated  range  one-off  cost  (terminal  plus  software)  of  EUR  850  per  terminal154  for 
merchants not yet accepting electronic payments, their potential one-off cost would be about 
EUR 2.7 billion. As regards annual recurrent costs, for maintenance and licences, calculating 
with  a  mid-range  average  of  EUR  50  per  terminal  would  result  in  annual  running  costs  of 
about EUR 160 million.  

As an alternative, the costs of the acceptance infrastructure for merchants was also calculated 
based  on  information  received  from  the  ECB.  According  to  market  experts  who  consulted 
with  the  ECB,  the  cost  of  updating  existing  European  terminals  for  the  acceptance  of  non-
proprietary NFC and/or QR codes would range between EUR 40 and EUR 75 per terminal. 
This  includes  a  partial  replacement  of  some  terminals  as  they  cannot  be  upgraded  due  to 
hardware limitations and can only be subject to a partial software update. The estimated costs 
per  terminal  also  depend  on  assumptions  by  the  terminal  vendor  about  the  number  of 

149 Data is based on a small number of heterogeneous respondents. 
150 https://sdw.ecb.europa.eu/reports.do?node=1000001404 
151  Calculating  with the  middle  of the  estimated  range  (terminal  plus  software)  of  EUR 530 per  terminal,  the  total  one-off  cost  would be 
about EUR 7.1 billion. 
152 Source: Study on the payment attitudes of consumers in the euro area 2022 
153 Resulting with a need for an additional 3.2 million POS terminals. This is under the assumption that each terminal processes the same 
number of transactions. 
154 For consistent methodology, we used the middle of the range, but it is very likely that the per-terminal cost would be much lower for 
these merchants, especially for small merchants. Micro enterprises or sole entrepreneurs would probably need a very simple POS solution 
which would likely cost much less than EUR 850, especially considering the fact that merchants can even today accept card payments with 
their mobile phones. These modern solutions enable to accept payments not only using QR codes but also NFC antennas. 

54 

 
 
 
 
                                                           
terminals the merchants are going to have, as well as factors such as whether the digital euro 
would  be  based  on  a  new  card  solution  or  use  QR  codes,  for  which  no  decision  has  been 
made  yet.  Based  on  this  information,  the  merchants  in  the  euro  area  that  already  accept 
electronic payments can foresee a total cost of about EUR 0.5-1 billion when implementing a 
new  terminal  standard.  For  merchants  not  yet  accepting  digital  means  of  payments,  the 
additional one-off cost could range between about EUR 125 million and EUR 250 million.155 

In addition, the typical POS cycle, i.e. natural replacement of POS terminals by merchants, is 
about  4  years.  Some  of  the  merchants  may  be  able  to  change  their  POS  terminal  with  the 
natural cycle and not extraordinarily – thus minimising any extra cost for these digital euro 
capable POS terminals. It is possible that merchants that do not yet accept private electronic 
payments  will  decide  to  accept  digital  euro  payments  and  at  the  same  time  also  a  private 
electronic payment. To minimise their investment needs and not squeeze out other payment 
means,  the  new  POS  solutions  should  be  able  to  handle  multiple  payment  means. 
Interoperability  between  the  digital  euro  infrastructure  and  pan-European  private  payment 
means could also be ensured via the Regulation. 

Respondents to the Commission’s targeted consultation expect that with the development of 
new  payment  solutions,  accepting  electronic  payments  means  will  become  more  attractive. 
The costs of acceptance infrastructure will decrease as a result, especially for SMEs, because 
payment  solutions  could  be  integrated  on  existing  mobile  devices,  using  for  example  NFC 
and  dynamic  QR  codes.  Others  believed  that  costs  should  decrease  due  to  technological 
developments and innovation, as well as economies of scale as electronic payments continue 
to  develop.  By  adopting  these  technologies,  especially  small  and  minor  merchants  could 
substantially  reduce  the  one-off  cost  of  new  acceptance  infrastructure.  However,  the  same 
approach would hardly work for medium-size and larger merchants, which typically rely on 
POS terminals integrated with their cash registers or cash barriers. 

For  e-commerce  and  online  payments,  the  acquiring  PSP’s  one-off  costs  for  upgrading  the 
POS/acceptance  infrastructure  to  support  the  digital  euro  as  an  additional  payment  method 
should be marginal (with some dependency from design decisions).  

Moreover, besides the cost of the acceptance infrastructure, merchants would incur recurrent 
transaction  fees  to  financial  intermediaries  who  provide  acquiring  services  and  process 
payment  transactions  similar  to  current  electronic  payments.  However,  considering  the 
uncertainty as regards the technical choices and the future business model it is not possible to 
estimate them at this point in time. Nevertheless, it is reasonable to assume that they will not 
be higher than the fees/costs of existing payment means (mostly cash and cards), resulting in 
zero incremental costs.156 

155 The results were calculated using a similar methodology as above, i.e. on the basis of 13.5 million POS terminals, and 81% of electronic 
payment acceptance rate. It needs to be noted that it is not possible to predict how many such merchant would decide to accept digital euro 
payments eventually. 
156  Merchants  pay  merchant  service  charges  (MSC)  related  to  the  acceptance  of  card  payments.  MSCs  has  three  major  components: 
interchange fees, scheme fees (including processing fees) and acquirers’ margins. According to a study by CMSPI & ZEPHYRE, the MSC 
in EU 28 on average was about 0.48% in 2020. The interchange fees related to intra-EU consumer credit and debit card payments are capped 
by the Interchange Fee Regulation (IFR) at 0.3% and 0.2% of the value of the POI payment transactions, respectively. This can vary among 
Member States and be much lower than the cap. According to the study, the average interchange fee was 0.2% in 2020. Acquirers’ margins 
depend on the services provided and the negotiating position of merchants. . According to the study, the average acquirer margin was 0.18% 
in 2020. Lower scale and weaker bargaining power nonetheless often result in higher acquirers’ margins and hence higher MSCs for smaller 
merchants.  Scheme  fees  on  average  were  0.09%  in  Europe  according  to  the  study.  Source:  https://www.bargeldlosblog.de/wp-
content/uploads/CMSPI-Zephyre-Scheme-Fee-Study-V3-1.pdf 
The caps in the Interchange Fee Regulation (IFR) were based on the so-called ‘Merchant Indifference Test’, aiming at an interchange fee 
level that would result in MSCs that makes the merchants indifferent as regards the choice of the payment means by the payer (cash and 
cards). Hence it is reasonable to assume that acceptance of cash on average has comparable fees/costs of that of cards for merchants. 

55 

 
 
                                                           
No significant additional administrative burden is expected to derive from this option for the 
private sector. Payment reporting to the Eurosystem is mostly done by market infrastructures. 
PSPs have very limited requirements on payment reporting, which will likely be the same for 
a digital euro, especially if the Eurosystem would already obtain aggregated information by 
settling digital euro payments. 

Option  1c:  Digital  euro  with  legal  tender  status  with  some  exceptions  to  mandatory 
acceptance  

Under option 1c, the digital euro would be granted legal tender status with some exceptions 
to mandatory acceptance.  

Under  this  option,  users  would  still  benefit  from  a  wide  acceptance  network  as  merchants 
who are above the thresholds set for microenterprises and already accept other digital means 
of payment could not benefit from such exceptions to mandatory acceptance and would have 
to  accept  digital  euro  payments.  However,  merchants  could  still  be  temporarily  exempted 
from  mandatory  acceptance  for  reasons  of  good  faith.  To  cater  for  a  certain  level  of 
contractual freedom, merchants who have expressly agreed with payers on a different means 
of payment would also  be exempted from the obligation to accept digital euro payments.157 
Exceptions  would  ensure  the  proportionality  of  the  acceptance  obligation  and  avoid 
overburdening merchants for which an obligation to accept payments in digital euro could be 
disproportionate.  

Therefore,  the  impact  of  the  exception  to  mandatory  acceptance  on  the  effectiveness  in 
meeting the specific objectives compared to Option 1b should be small. A wide acceptance 
by  payees,  and  in  particular  merchants,  would  still  be  guaranteed,  and  the  proportionate 
nature of any exceptions should not have a considerable bearing with regard to the objectives.  

Depending  on  the  design  of  the  digital  euro,  some  merchants  could  see  larger  part  of  their 
revenue  or  profit  burdened  by  the  costs  described  in  option  1b  related  to  both  one-off  and 
recurrent  costs  of  acceptance,  compared  to  larger  merchants,  unless  these  are  mitigated  by 
new payment solutions, such as mPOS (see above) requiring limited investments. In any case, 
while  the  costs  for  merchants  accepting  electronic  means  of  payments  would  likely  be  the 
same  under  Options  1b  and  1c,  the  latter  option  would  mean  no  obligatory  costs  for 
merchants  that  are  exempted  from  mandatory  acceptance.  As  presented  under  option  1b, 
merchants not accepting electronic means of payments could save the one-off costs related to 
terminals, which estimated – very roughly – at EUR 2.7 billion in the euro area, as well as the 
recurrent  cost  of  around  EUR  160  million  for  terminal  maintenance  and  licences,  and  the 
currently  unquantifiable  per  transaction  fees.  As  regards  costs  for  PSPs,  the  analysis  under 
Option  1b applies here as well, the difference being an expected slightly  lower  demand for 
digital euro services due to a somewhat lower take-up of digital euro transactions – leading to 
potentially lower supply and corresponding costs. 

157  If  merchants  who  do  not  accept  electronic  means  of  payment  are  exempted,  digital  euro  could  not  be  used  for  21%  of  the  payment 
transactions. 

56 

 
 
 
 
                                                           
Consistency of the different options 

Option 1a is not consistent with the legal status of other forms of central bank money (euro 
banknotes  and  coins)  that  have  been  granted  legal  tender  status  in  the  euro  area.158  It  may 
thus  prove  complex  to  communicate  to  the  public  why  one  form  of  central  bank  money 
available to the public (euro cash) is legal tender, while another is not (digital euro). This may 
become  a  source  of  legal  and  economic  uncertainty  around  the  nature  and  basic 
characteristics of the digital euro, which would further undermine its acceptance. It could also 
affect the usability of Article 133 TFEU as a legal basis, which stipulates that the measures 
shall be necessary for the use of the euro as the single currency. 

Option 1b and 1c would be consistent with the legal tender status of euro cash, which is the 
only  central  bank  money  currently  available.  However,  Option  1b  and  1c  would  also  have 
implications  for  the  definition  and  further  regulation  of  the  legal  tender  status  of  cash. 
Although the latter is enshrined in EU law and has been interpreted by the Court of Justice of 
the EU for banknotes, there is no detailed regulation in Union secondary law. Regulating the 
legal tender status of the digital euro in secondary law without defining the legal tender status 
of euro cash would seem inconsistent. In addition, consistency would be further enhanced if 
the legal tender status of cash and the legal tender of the digital euro would be defined in a 
similar  way  (see  Annex  7).  Measures  to  improve  access  to  cash  (see  Boxes  E  and  F,  and 
Annex 7) would also be an appropriate solution to ensure that the central bank money issued 
by  the  ECB  remains  available.  However,  improving  access  to  cash  will  only  be  part  of  the 
solution, as euro cash alone is not sufficient to support the EU’s economy in the digital age. 
Therefore, the issuance of the digital euro would allow the central bank money issued by the 
ECB to support the EU’s economy in the digital age, in addition to cash. 

Stakeholders’ views on the different options 

A majority of respondents to the Commission’s targeted consultation on a digital euro viewed 
legal  tender status  as an important  feature and supported regulating legal  tender in  detail  at 
Union  level,  including  the  possibility  of  exceptions  to  mandatory  acceptance.  69  of 
professional  respondents  (56%)  supported  granting  a  legal  tender  status  to  the  digital  euro, 
with  unequivocal  support  from  merchants  and  consumers  whereas  only  a  minority  of 
financial institutions favoured this proposal owing to concerns on the digital euro payments 
competing  with  private  payment  means.  Views  appeared  more  split  on  exceptions  to  the 
principle  of  mandatory  acceptance:  59  professional  respondents  (48%),  including  a  large 
number of financial institutions, supported such exceptions, with an emphasis on merchants 
that  do  not  yet  accept  digital  means  of  payment  and  local  exceptions  defined  by  Member 
States. In contrast, 33 professional respondents (27%), mostly merchants, showed reluctance 
to  exceptions  in  case  the  digital  euro  can  be  embedded  into  the  existing  acceptance 
infrastructure in a costless way. Consumer associations strongly supported introducing a legal 
tender with as few exceptions as possible.  

Respondents  mostly  agreed  that  exceptions  should  be  regulated  at  Union  level  while 
providing for the possibility of defining further exceptions at Member State level, subject to a 
Union level authorization procedure.  

Box F – Impacts of the options on the on legal tender of cash 

Acceptance of cash 

158 The notion of legal tender is enshrined in Article 128(1) TFUE as regards euro banknotes. It is enshrined in identical terms for euro coins 
in Article 11 of Regulation 974/98 on the introduction of the euro. See Annex 7 for further details. 

57 

 
 
                                                           
EU action on the acceptance of cash entails a codification and clarification of the jurisprudence of the 
Court of Justice of the European Union, itself drawing on the Commission Recommendation of 2010 
on the key principles of legal tender. Therefore, these clarifications do not entail any direct impact or 
costs  beyond  providing  greater  legal  certainty  throughout  the  euro  area  as  to  what  the  scope  and 
effects of legal tender consists of. 

Access to cash 
As part of the baseline scenario, no separate EU-level action would be taken on access to cash. Under 
this  scenario,  the  soft  law  measures  that  some  Member  States  are  likely  to  take  will  seek  to  incite 
credit  institutions  to  provide  adequate  cash  services  to  citizens  and  business  customers,  with  the 
needed  geographical  coverage.  Such  non-coordinated  measures  risks  to  create  a  patchwork  of 
different  policies  and  practices,  with  some  Member  States  taking  significant  action,  whilst  other 
Member States would not take sufficient action, thereby risking allowing cash access levels to drop 
below  a  minimum  level.  This  would  exacerbate  the  heterogeneous  situation  of  cash  access  on  the 
ground and would be incoherent with the status of the euro as the single currency. 
Option  1(b-c).i,  a  soft  law  instrument  (e.g.  a  Commission  Recommendation)  would  leave  to  the 
discretion of the Member States whether to act and which actions they opt for to promote access to 
cash in their Member State. This would likely mean that some Member States would take action to 
ensure  sufficient  access  to  cash  while  others  would  not.  This  would  not  allow  for  a  more  uniform 
interpretation  of  the  key  principles  of legal tender  of cash. The  concerns  of citizens  and businesses 
about inadequate access to cash would therefore not necessarily be addressed sufficiently across the 
euro area. This would only partially address the objective of ensuring a sufficient access to cash and 
tolerating insufficient access in parts of the euro area could erode the effectiveness of the legal tender 
status of the single currency.  
Option 1(b-c).ii, a legally binding obligation on Member States in the proposed Regulation on legal 
tender of cash, would oblige the Member States to ensure sufficient and effective access to cash on 
their  territory.  As  a  result,  all  Member  States  have  to  make  a  rigorous  assessment  of  the  needs  of 
citizens  and  businesses  in  terms  of  access  to  cash,  and  to  take  further  corresponding  measures  to 
address those needs if necessary.  Member States will have to determine what sufficient and effective 
access means in their country-specific context (i.e. taking also into account levels of cash access based 
on common indicators), and what degree of action needs to be taken in order to guarantee it. Should a 
Member State, based on its analysis, conclude that access to cash is sufficient and effective, it would 
not  be  required  to  take  further  action.  When  a  Member  State  concludes  that  access  to  cash  is  not 
sufficient,  or  is  at  risk  of  deteriorating,  action  would  have  to  be  taken  by  adopting  specific  and 
appropriate measures.  
At  the  same  time,  by  leaving  to  Member  States  the  scope  to  adapt  the  precise  content  of  the 
appropriate  measures  to  the  cash  access  situation  on  the  ground  and  the  structure  of  their  banking 
system, this option would avoid imposing an inappropriate ‘one size fits all’ approach. The measures 
taken  by  the  Member  States  would  not  impose  at  EU  level  highly  specific  requirements  on  the 
Member States, such as an obligation to maintain a specified number of bank branches or ATMs per 
geographic  or  population  unit.  Rather,  these  measures  would  leave  to  the  Member  States  the 
responsibility  to  assess  what  sufficient  and  effective  access  means  in  their  country-specific  context 
(i.e. taking also into account demand for cash access), and what degree of action needs to be taken in 
order to guarantee it, having only the basis of the common indicators specified by the Commission. If 
Member States assess that the cash access situation on their territory is already sufficient, then they 
could  impose  minimum  levels  corresponding  to  that  status  quo,  so  that  banks  would  not  need  to 
extend their existing branch or ATM presence; but these levels would set a floor below which access 
levels would not be allowed to fall.  
Since Member States would need to further specify their measures taken to ensure cash access, define 
the  sufficient  geographic  standards  for  access  requirements  for  ATMs  that  correspond  to  their 
population  needs  and  service  level  specificities,  and  assess  which  payment  service  providers  fall 
within access requirements and recommendations, the possible cost implications would be determined 
by the needs on the ground and the corresponding decisions of the Member States. If access to cash 
remains sufficient in a Member State, measures would not be needed in that Member State so there 
would  not  be  any  additional  costs  on  banks.  In  Member  States  where  cash  access  has  already 

58 

 
 
significantly deteriorated there could be costs for banks associated with restoring a sufficient level of 
access to cash, but the extent of such costs would depend on the decisions of the national authorities 
on the sufficient and effective levels of access, also in the case that the Commission would adopt an 
implementing act. The EU Regulation as such would not directly impose costs on banks or retailers.  
The  recent  example  of  Belgium  illustrates  how  the  federal  government  reached  a  gentleman’s 
agreement159 with the banking sector in order to ensure sufficient access to cash for the population, in 
a  country  where  the  number  of  ATMs  is  projected  to  decrease  by  50%  between  2015  (over  8000 
ATMs)  and  2025  (around  4000  ATMs  foreseen)  and  where,  according  to  the  October  2022 
Eurobarometer,  one  third  of  the  population  considers  that  it  is  not  easy  to  withdraw  cash160.  This 
agreement  built  on  plans  by  the  country’s  main  banks  to  pool  together  the  provision  of  ATMs  and 
thereby  reduce  the  number  and  location  of  ATMs  in  a  planned  way.  In  March  2023,  the  Belgian 
government agreed with the banking sector to supplement by 207 the number of planned pooled ATM 
locations and by 80 the number of ATMs in urban areas planned to be opened by 2025, and to have a 
minimum  of  one  ATM  in  each  commune.  Although  this  agreement  represents  an  increase  of 
approximately 5% in the planned number of pooled ATMs, this should be seen in the context of the 
overall reduction of banks’ costs over many years through branch and ATM closures and the likely 
cost savings for individual banks through the pooling of ATMs (costs and savings are not disclosed by 
the participating banks because this information is confidential). 

The designation of one or more national competent authorities with oversight and regulatory powers 
over the market activities of the cash industry would in most cases not imply that Member States need 
to set up new authorities. It rather means that it would need to confer regulatory powers on an existing 
central  authority,  in  most  cases  the  national  central  bank,  which  would  then  have  the  authority  to 
adopt  further  measures  as  they  see  fit,  such  as  imposing  information  duties,  setting  up  guiding 
principles  and  codes  of  practice  as  well  as  to  require  or  prohibit  certain  actions  taken  by  cash 
providers  in  order  to  guarantee  sufficient  access  to  cash.  The  outcome  of  the  ELTEG  III  meetings 
suggest  that  several  Member  States  are  already  undertaking  measures  aiming  at  ensuring  sufficient 
and effective access to cash (e.g. monitoring of ATM coverage) without significant extra burden, and 
they are to an extent able to accommodate these measures within their authorities’ existing mandate 
and range of tasks. 

Distribution 

Option 1d: Compulsory distribution of digital euro by all payment service providers  

In a digital context, a default obligation to accept digital euros would be ineffective without a 
wide distribution infrastructure and services provided by PSPs. As emphasised by the IMF,161 
“attributing legal tender status to a means of payment that cannot be received by the majority 
of  the  population  might  be  legally  possible  but  it  raises  fundamental  questions,  including 
from  a  fairness  perspective”.  Obliging  PSPs  to  distribute  digital  euro  upon  request  would 
ensure  the  effectiveness  of  a  possible  legal  tender  status  under  Option  1b  or  1c.  It  would 
complement  the  guaranteed  wide  acceptance  network  for  users  created  through  the  legal 
tender  status  by  ensuring  easy  and  wide  access  to  digital  euro  and  could  therefore  also 
support financial inclusion efforts.  

A  widely  distributed  digital  euro  would  benefit  users  and  merchants  as  network  effects 
could  reduce  costs  and  increase  availability.  This  is  also  applicable  to  option  1e  (i.e. 
compulsory  distribution  of  digital  euro  by  certain  PSPs).  Option  1d  could  also  support 
financial inclusion efforts as PSPs would be required to provide basic digital euro services, 

159 https://economie.fgov.be/sites/default/files/Files/Financial-services/accord-atm.pdf 
160 https://europa.eu/eurobarometer/surveys/detail/2666 
161 IMF Working paper (WP/20/254) “Legal Aspects of Central Bank Digital Currency: Central Bank and Monetary Law Considerations”, 
W. Bossu and alii.  

59 

 
 
                                                           
such  as  provision  of  an  account/wallet,  payments  and  funding/defunding  operations,  to  the 
most vulnerable and unbanked people free of charge (see ECB’s report on a digital euro). 

The Eurosystem would also benefit from a higher use of the digital euro (given the benefits 
it may gain from seigniorage, and the fact that costs per transaction will be lower than in the 
option when distribution by PSPs would be voluntary). At the same time, the operational cost 
of  option  1d  may  slightly  increase  compared  to  other  options  as  PSPs  would  need  to  be 
supervised on their digital euro activities in addition to their other payment services activities. 

Option  1d  would  be  effective  in  supporting  a  general  acceptance  obligation  deriving  from 
legal tender status, subject to possible exceptions, and of the corresponding right to pay with 
digital  euro.  However,  obliging  all  PSPs  to  distribute  the  digital  euro,  without  any 
considerations  for  their  activities,  geographical  location  or  size  may  be  disproportionate  to 
reach the two specific objectives. An obligation on all regulated PSPs to distribute the digital 
euro  would  mean  that  every  obliged  entity  would  need  to  make  investments  to  be  able  to 
serve  customers  with  digital  euro.  Based  on  the  feedback  from  the  public  consultation,  the 
exact  amount  of  these  investments  is  not  possible  to  estimate  at  the  current  juncture  as  it 
would depend on the technical design and implementation. Depending on whether PSPs need 
to open and manage new accounts for their customers, and on how far existing infrastructure 
could be reused, the investment cost could be moderate to significant. In line with the basic 
estimate on the basis of the Commission Impact Assessment on Instant Payments in Option 
1b,  the  one-off  adjustments  costs  for  all  euro  area  PSPs  to  be  able  to  provide  digital  euro 
payment services (compulsory distribution) could be estimated to amount to up to EUR  6.8 
billion. A more elaborate estimate based on grouping PSPs into two size groups (see Option 
1b)  leads  to  an  estimate  of  up  to  EUR  3.6  billion.162  However,  depending  on  the 
compensation  model  for  digital  euro  payments,  PSPs  might  be  able  to  recoup  some  of  the 
cost  of  these  investments  by  receiving  fees  (e.g.  merchant  fees)  after  transactions  in  digital 
euro  and  by  providing  customers  with  additional  digital  euro  services  and  thus  generate 
income. Since the demand for such additional services cannot be reliably predicted, the extent 
to  which  the  latter  can  contribute  to  PSPs’  income  is  highly  uncertain.  The  burden  would 
especially be disproportional for PSPs that have highly specialized business models  and are 
not  targeting  private  individuals.  Given  the  larger  one-off  costs  and  smaller  running  costs, 
PSPs  with  smaller  customer  bases  would  also  bear  the  costs  disproportionately.  In 
combination  with  Option  1b  or  1c,  PSPs  however  could  market  additional  services  for  a 
larger digital euro user base. 

162 Both these estimates can be considered as conservative, as an important one-off cost item used for instant payments, the setting up of the 
24/7/365 operation would not have to be redone for the digital euro. 

60 

 
 
 
 
                                                           
Option 1e: Compulsory distribution of digital euro by credit institutions with retail business  

Under this option, people and businesses would have the guaranteed possibility to use digital 
euro services via credit institutions that are already active in retail business services and via 
all  other  PSPs  that  voluntarily  decide  to  distribute  the  digital  euro.  This  would  ensure  the 
effectiveness of legal tender status, while avoiding putting a disproportional burden on PSPs 
with specialised, non-consumer oriented business models.  

Option  1e  could  be  somewhat  less  effective  in  supporting  a  general  acceptance  obligation 
deriving from legal tender status compared to Option 1d. At the same time, credit institutions 
that already have similar services and cover most of the European people and businesses may 
be  sufficient  to  distribute  the  digital  euro.163  Therefore,  option  1e  would  also  support 
financial  inclusion  efforts  to  a  similar  extent  as  option  1d,  given  that  the  requirement  to 
provide basic digital euro services to the most vulnerable and unbanked people free of charge 
would still apply to all credit institutions with retail business.  

The  adjustment  cost  on  PSPs  discussed  under  Option  1d  would  be  lifted  for  non-credit 
institutions and those credit institutions that have no consumer facing businesses. On August 
2022, the number of credit institutions in the euro area was 4117.164 Calculating with a one-
off  cost  estimates  for  PSPs  of  maximum  EUR  1.3  million,165  the  total  adjustment  cost  for 
credit  institutions  could  be  up  to  EUR  5.4  billion.  A  more  elaborate  estimate  based  on 
grouping PSPs into two size groups (see Option  1b) leads to  an estimate of up to  EUR 2.8 
billion.166  Any  costs  for  non-obliged  PSPs  would  be  dependent  on  their  business  decision 
whether  they  chose  to  offer  digital  euro  services.  Consequently,  the  general  and  the  two 
specific objectives could likely be reached more efficiently by obliging only a subset of PSPs, 
credit institutions, to offer digital euro services while others would have the discretion to join.  

Option 1f: No compulsory distribution of digital euro by PSPs subject to a review clause 

Under  this  option,  every  PSP  would  make  their  own  business  decision  whether  to  offer 
services related to the digital euro. It can be assumed that only PSPs that are confident to see 
a return would make the investments and bear the one-time and ongoing costs. Consequently, 
only PSPs that can reach a higher digital euro customer base and reach profitable and viable 
operation would likely enter this market.  

However,  this  option  would  allow  the  market  to  decide  on  the  level  of  use  of  an  official 
currency and its availability to be used as a means of payment with legal tender. This option 
therefore carries the risk that the voluntary distribution by PSPs is not sufficient, leading to 
insufficient network effects. A correction of such a market failure via a review clause would 
only come with some delay.  

Compared to Options 1d and 1e, there is thus less certainty that Option 1f would generate a 
wide enough user base in the short run and support the general acceptance obligation deriving 
from  the  legal  tender  status.  At  the  same  time,  a  viable  business  model  that  would  be 
promoted under option 1f may ensure the success and permanent wide use of a digital euro 

163 By way of example, in China, the six largest banks were originally tasked with the distribution of the digital yuan while other large PSPs 
such as WeChat and Alipay joined the distribution network later. 
164 https://www.ecb.europa.eu/stats/ecb_statistics/escb/html/table.en.html?id=JDF_MFI_MFI_LIST This figure may still include credit 
institutions that have no consumer facing businesses. 
165 See under Option 1b. 
166 This is based on the assumption that the size distribution of credit institutions is the same as that of PSPs offering SEPA credit transfers. 

61 

 
 
                                                           
for payments for the medium and long run, but this also depends on the design of the digital 
euro and the remuneration model.  

Finally,  as  the  investment  needs  for  PSPs  and  the  impact  on  their  businesses  cannot  be 
thoroughly  assessed  at  this  stage  due  to  the  unknown  number  of  PSPs,  the  costs  of  a 
voluntary distribution cannot be adequately substantiated and assessed against the benefits it 
will bring in achieving sub-objective 1. Nevertheless, using the same analogy to the Instant 
Payment Impact Assessment as in Option 1b and considering the fact that after 5 years only 
around  70%  of  the  relevant  PSPs167  offered  instant  payments  voluntarily  to  their 
customers168, we can roughly put the adjustment costs for PSPs to amount to up to EUR 4.8 
billion. A more elaborate estimate based on grouping PSPs into two size groups (see Option 
1b) leads to an estimate of up to EUR 2.5 billion. 

Consistency 

On  Options  1d  and  1e,  compulsory  distribution  by  credit  institutions  engaging  in  retail 
business would be consistent with the approach under the Payment Accounts Directive169, the 
overall objective of which is to ensure that every adult citizen in the EU can get access to a 
payment  account  with  basic  features.  The  digital  euro  could  be  provided  like  a  payment 
account  with  basic  features  by  credit  institutions,  supporting  the  financial  inclusion  of 
unbanked  individuals.  In  that  respect,  the  ECB  digital  euro  report  suggests  offering  digital 
euro  basic  features  for  free  to  all  citizens.  In  this  case  however,  a  compulsory  distribution 
may  impinge  on  the  PSPs’  choices  of  solely  engaging  in  business  deemed  profitable,  as 
guaranteed under option 1f. Voluntary distribution with a review clause under option 1f may 
be  insufficient  to  create  a  wide  use  base  in  the  short  run,  slowing  down  the  uptake  of  the 
digital euro. 

Compensation model and merchant fees  

Option 1g: Merchant fee pricing left to the market 

This option would be most market neutral and have the least intervention into the competition 
between various payment means.  

Fees  left  to  market  pricing  may  be  the  most  effective  option  in  terms  of  incentivising 
intermediaries to distribute the digital euro as PSPs will make sure their costs are recovered 
and they make a profit.170 This option could in turn lead to higher availability of the digital 
euro and better support specific objective 1. 

At  the  same  time,  granting  the  digital  euro  legal  tender  status,  with  the  corollary  of 
mandatory  acceptance,  carries  the  risk  that  intermediaries  overcharge  merchants  for  digital 
euro payment services if the pricing is left to the market, given that merchants would have no 
choice  but  to  accept  digital  euro  payments.  In  instances  where  PSPs’  competition  in 
providing  acquiring  services  to  merchants  is  limited,  merchants  may  face  higher  fees,  in 
particular in less competitive areas of the euro area, also taking into account the mandatory 
acceptance obligation that would come with the legal tender status (if it is granted). While the 
acquiring market for payments is deemed efficient (about 400 acquirers compete in the euro 

167 Of those that carry out regular SEPA credit transfers in euro. 
168 This 70% voluntary adherence rate is taken as the basis for the current estimation, yet the actual adherence will depend on the actual costs 
and the customer demand. 
169 Directive 2014/92/EU of 23 July 2014 
170 Of course a mandatory distribution by some of the PSPs may be even more effective. 

62 

 
 
                                                           
area)  the  obligation  of  merchants  to  accept  digital  euro  payments  may  create  an  uneven 
negotiation situation.  

Furthermore, additional competition concerns may arise as regards any fees to be transferred 
between PSPs following a similar model as interchange fees for card payments.  The risk of 
overcharging merchants with such inter-PSP fees (e.g. fees transferred by the acquirer PSPs 
to  the  distributor  PSPs  in  case  of  POI  transactions)  can  also  be  considerable  looking  at  the 
experiences  with  the  interchange  fees  on  card  payments  in  the  past  before  regulatory 
intervention.  Specifically,  merchants,  in  particular  small  ones,  have  a  weak  countervailing 
market  power  as  opposed  to  their  acquirers,  especially  in  the  context  of  mandatory 
acceptance,  compounded  by  their  inability  to  negotiate  merchant  service  charges  below  the 
level  of  inter-PSP  fees  (floor  effect).  In  addition,  inter-PSP  (interchange)  fees  are  prone  to 
reverse  competition171,  where  issuers  (the  recipients  of  such  fees)  favour  the  issuance  of 
payment instruments with the higher interchange fee levels leading thus to the crowding out 
of lower interchange fee based payment means (e.g. domestic card schemes or SCTinst-based 
payment solutions). 

Importantly,  it may be very difficult for the many  PSPs to  agree on  a single inter-PSP fee. 
Without any central coordinating party (like a scheme owner) or regulation, the hundreds of 
acquirer and thousands of issuer PSPs may not be able to come to a multilateral agreement on 
such  a  fee172.  In  particular,  the  opposing  interests  of  the  two  types  of  PSPs  as  regards  the 
interchange  fee  levels173,  makes  coming  to  an  agreement  potentially  even  more  difficult. 
Without  an  inter-PSP  fee  and  considering  the  free  basic  use  of  digital  euro  for  private 
individuals, the compensation of issuers for their costs may not be sufficient. If (some of) the 
issuer PSPs  are not  required to  distribute the digital euro, the lack of  an inter-PSP fee  may 
lead  to  very  limited  possibility  for  users  to  get  access  to  a  digital  euro.  At  the  same  time, 
merchants could benefit from a possible lack of agreed inter-PSP fee, as their overall charges 
would likely be lower than those of card payments. Such savings could also be beneficial for 
users if merchants pass it on by lowering the final prices of their goods and services.  

Potential higher market determined fees would lead to higher, and possibly disproportionate, 
costs for merchants and eventually for users, leading to a less efficient digital euro ecosystem. 
High  fees  may  also  diminish  merchants’  willingness  or  motivation  to  accept  digital  euro 
payments eventually (in case legal tender is not granted). Costs might be particularly high for 
small  merchants  as  they  have  an  even  lower  bargaining  power  than  medium  to  large 
merchants  regarding  fees  imposed  by  PSPs,  on  top  of  covering  the  one-off  and  recurring 
costs of acceptance of the digital euro in case they are not exempted. 

PSPs  participating  in  the  targeted  consultation  generally  advocated  for  a  pricing  left  to  the 
market. If priced similarly, PSPs’ income from payment transactions would probably not be 
materially affected as any lost income from private payment means would be compensated by 
digital  euro  payments  that  replace  them.  At  the  same  time,  if  more  central  bank  money  is 
used at the expense of private money, this would entail an additional indirect cost for banks 
as they make profit from interest margins on customer balances (‘deposit seigniorage’). 

171 It is reverse in a sense that competition leads to higher prices. 
172 The same goes for a network of thousands of bilateral agreements between them. 
173 In principle, distributor PSPs (the recipients) have an interest in higher interchange, while acquirer PSPs (the payer), who just pass it on 
to merchants, have an easier job in recruiting merchants at a lower interchange fee level. This is however complicated by the two-sided 
nature of payments, as the intermediaries would have to consider the interaction of the two sides. For instance, too high interchange may 
lead to low acceptance, leading to low usage of the payment mean, leading to lower interchange fee revenue for the issuers. Another factor 
influencing the outcome is the extent to which the issuers and acquirers are the same. In some MSs the leading acquirers tend to be specialist 
PSPs independent from local issuers, while in other MSs acquirers are also still issuers. 

63 

 
 
                                                           
Option  1h:  Determination  of  maximum  amounts  of  merchant  fees  on  the  basis  of  a 
methodology set by the legislature and developed by the ECB  

Under this option, the ECB would develop a methodology based on objective criteria set in 
the legislation to determine the maximum amounts of merchant fees. This should be done on 
the  basis  of  parameters  set  in  the  enabling  legislation  with  the  objective  of  considering 
intermediaries’  costs,  considering  the  Interchange  Fee  Regulation  or  the  merchant 
indifference test174 as benchmarks for inter-PSP fees, considering the two-sided and network 
nature  of  payments,  avoiding  excessive  fees  for  merchants,  and  avoiding  crowding-out  of 
private means of payment. 

Regulating  inter-PSPs  fees  would  be  efficient  as  this  has  an  advantage  in  overcoming  the 
difficulties of a large number of PSPs having to agree on its level multilaterally or bilaterally. 
Inter-PSP fees would enable issuer PSPs to recover at least part of their costs in the presence 
of  an  obligation  to  provide  basic  services  to  their  private  individual  customers  for  free175, 
thereby ensuring their incentives to provide quality services. Respecting the set criteria could 
ensure that reverse competition is prevented, and existing, potentially more efficient payment 
means  are  not  crowded  out,  and  that  the  increase  of  merchant  service  charges  (by  the 
building-in of inter-PSP fees) remains limited. 

On  the  other  hand,  regulating  (capping176  or  fixing)  inter-PSP  fees  would  be  a  challenging 
exercise due to lack of (e.g. cost) data and observed market developments, especially before 
the launch of the digital euro. Furthermore, it may prove difficult to fix ‘one inter-PSP fee’ 
that works for all digital euro payment situations, given discrepancies across Member States 
as  regards  their  domestic  payment  markets  and  existing  competing  payment  methods  (for 
instance the presence of domestic card schemes). Inter-PSP fees set too low may weaken the 
incentive for the issuer PSPs to distribute the digital euro in case they are not obligated to do 
so,  as  they  would  prioritise  private  payment  means  that  yield  the  highest  income.  Setting 
inter-PSP  fees  too  high  would  harm  merchants  through  high  fees  and  may  lead  to  the 
crowding out of efficient payment means on the issuer side to the detriment of the society as 
a whole. This option would also incur costs for the ECB who would need to collect, audit and 
analyse  data  for  its  impact  assessment,  and  for  supervisors  who  would  need  to  check,  and 
ensure that PSPs correctly implement the caps, as they do currently for the IFR caps. 

Regulating  the  merchant  fees  themselves  (e.g.  at  acquirer  costs)  could  be  potentially  more 
advantageous for merchants that already have limited bargaining power, while being coherent 
with the legal tender status of the digital euro (i.e. acceptance obligation). This could also be 
done under objective criteria. At the same time, it may be difficult (and costly for the ECB) to 
identify  the  specific  costs  related  to  the  digital  euro  and  update  them  over  time,  also 
considering the great differences among PSPs and their operating costs. Regulating merchant 
fees is  also  the most interventionist option that is without much precedence in  the payment 
markets, a measure that even the Interchange Fee Regulation stopped short of in the field of 
payment  cards.  It  is  considered  that  competition  exists  in  the  acquiring  markets,  at  least  as 

174 Interchange fees have been subject to antitrust scrutiny by the European Commission and several national competition authorities in the 
past decades. Lately the European Commission applied the Merchant Indifference Test (MIT) as a benchmark for assessing efficiency 
justifications of MIFs brought forward by payment card schemes. MIT is a test that was developed in the academic literature and aims at 
identifying an interchange level which ensures that merchants are on average indifferent whether customers use payment cards or cash to 
make their purchases. An interchange set at this level would make the payers internalise the potential transactional efficiencies on the payee 
side, therefore enabling them to make a socially optimal choice when selecting the payment means in a given payment situation. 
175 Would need to consider their cross-selling opportunities and cross-subsidization practices at the same time. 
176 Capping could be implemented in a way that the cap applies as a default inter-PSP fee that applies in the absence of other multilaterally 
or bilaterally agreed fee levels that in any case may not exceed the cap levels. Card schemes apply similar default interchange fees. 

64 

 
 
                                                           
regards the merchant service charge components above interchange, not independent from the 
fact that specialist acquirer PSPs have entered the market in the last decades. 

This exercise furthermore comes with a lot of uncertainty, and appears to be rather costly. It 
would  be  consistent  with  the  Interchange  Fee  Regulation  as  concerns  the  inter-PSP  fee 
element, but not as regards the merchant fee itself. 

Many respondents to the targeted consultation on the digital  euro  – in particular consumers 
and  merchants  –  supported  limiting  the  fees  paid  by  merchants  to  PSPs  for  digital  euro 
transactions to their actual costs (and a reasonable margin of profit), as they fear being over-
charged.  

Option  1i:  Pricing  recommendations  on  merchant  fees  on  the  basis  of  criteria  set  by  the 
legislature 

Whether  or  not  regulating  merchant  fees  is  ultimately  warranted  requires  analysing  costs 
(across several competing payment instruments) and observation of the market developments. 
This can only be carried out after the digital euro is issued and distributed by PSPs. Against 
this background, the ECB could be mandated to issue - before the issuance of a digital euro - 
price  recommendations  or  guidelines  on  fees  (both  acquiring  and  inter-PSP  fees),  based  on 
principles/criteria  set  by  the  legislature.  The  ECB‘s  fee  recommendations  could  balance 
between the various considerations: compensation for costs, incentives for PSPs to distribute, 
no  crowding  out  of  private  payments  in  particular  the  cheaper  ones,  no  overcharging  of 
merchants, different, comparable interchange benchmarks, etc.  

ECB  recommendations  on  the  inter-PSP  fees  might  provide  the  necessary  certainty  for  the 
PSP community to agree on inter-PSP fee levels despite the legal risks as regards competition 
law. The involvement of the entire PSP community might also help reducing the information 
asymmetry and can lead to establishing the right inter-PSP fee levels that takes into account 
both sides and eventual local market conditions.  The PSPs would still have to find ways to 
come to a multilateral agreement, e.g. under the umbrella of an industry body or a scheme. At 
the  same  time,  the  non-mandatory  nature  of  guidance  may  still  imply  the  residual  risk  of 
intermediaries  setting  higher  inter-PSP  fees,  which  would  entail  the  risks  of  excessive 
merchant  fees  and  the  crowding  out  of  more  efficient  payment  means.  Nevertheless,  a 
successful guidance and a resulting agreement on inter-PSP fees could effectively reach the 
objective  of  availability  and  acceptance  of  the  digital  euro  in  retail  payments.  A  guided 
agreement  by the market players could  better reflect  market  realities than an administrative 
decision and thus serve as a better incentive for PSPs to distribute the digital euro. 

As regards the acquiring fees, no agreement between PSPs are necessary, but the regulatory 
discipline  via  recommendations  may  still  have  a  positive  effect  on  the  price  setting  of 
individual  PSPs,  lowering  the  risks  for  excessive  merchant  fees,  in  particular  in  domestic 
markets with less intense competition on the acquiring side. Recommendations may be less 
effective than regulation, but it appears that for the time being no regulation is justified in the 
acquiring market as it is deemed (at least in certain segments such as that for large merchants) 
competitive. A competitive acquiring market would ensure pushing down merchant fees (that 
includes  inter-PSP  fees)  towards  the  cost  level  of  PSPs,  regardless  of  the  acceptance 
obligation.  In any  case,  the ECB  would have to  monitor market  developments on a  regular 
basis and update its guidelines by subjecting it to regular reviews.  

65 

 
 
Conclusion 

Option 1c combined with option 1e or 1f and 1h are selected as the preferred policy options 
as  they  would  -  to  different  degrees  -  effectively  and  efficiently  achieve  the  specific 
objectives 1 and 2. The legal tender status would guarantee wide acceptance of a digital euro. 
Obliging  merchants  to  accept  digital  euro  but  providing  for  proportional  exceptions  to  this 
obligation would strike the right balance of cost and benefit. Granting legal tender status to 
the digital euro would also be consistent with the legal tender status of cash, which is the only 
central  bank  money  currently  available.  Different  legal  treatment  can  create  confusion  and 
lower trust  in  the digital euro  among users.  Both  an obligation on credit  institutions  with  a 
retail business177 to distribute the digital euro or voluntary distribution by PSPs subject to a 
review  clause  could  ensure  the  availability  of  digital  euro  for  users  and  merchants. 
Irrespective of whether there would be mandatory distribution or not, for financial inclusion 
purposes, consistency with the Payment Accounts Directive would be ensured so that un(der) 
banked citizens are provided with digital euro basic use services.  

It is preferred that maximum fees amount are determined on the basis of a methodology laid 
down in the legislature and developed by the ECB The ECB should continuously monitor the 
market of digital euro payments and the evolution of fees charged. This approach would be 
consistent with the legal tender status of the digital euro and would be effective in avoiding 
any  over-charging  of  merchants  that  would  be  required  to  accept  digital  euro.  Merchants 
would    be  in  a  weaker  position  to  negotiate  fees,  should  fees  be  left  to  the  market  under 
option  1g  or  only  subject  to  pricing  recommendation  under  option  1i.  In  the  absence  of 
mandatory caps on fees, there is a risk that merchants would be over-charged which would 
undermine the legal tender status of the digital euro  

177 All other PSPs would be free to decide to distribute the digital euro. 

66 

 
 
 
 
                                                           
Table 4. Comparison of options aimed to ensure that the central bank issued money, the 
euro can meet the payment needs in the digital age – Access and usability 

Option 

Effectiveness 

Coherence 

Overall score 

Efficiency 
(cost-
effectiveness) 
0 

0 

0 

0 

+ 

+ 

+ 

+ 

+ 

+ 

–  

++ 

++ 

++ 

++ 

Do nothing – no digital euro 
Usability 
    Legal tender status 
Option 1a - Digital euro without legal tender 
status 
Option 1b - Digital euro with legal tender 
status, including general mandatory acceptance 
by payees  
Option 1c - Digital euro with legal tender status 
with some exceptions to mandatory acceptance  
    Distribution 
Option 1d - Compulsory distribution of digital 
euro by all PSPs  
Option 1e - Compulsory distribution of digital 
euro by credit institutions with retail business  
Option 1f: No compulsory distribution of 
digital euro by PSPs subject to a review clause 
Compensation model and fees on merchants 
Option 1g: Merchant fee pricing left to the 
market 
Option 1h: Determination of merchant fees on 
the basis of a methodology set by the legislature 
and developed by the ECB 
Option 1i: Pricing recommendations on 
merchant fees on the basis of criteria set by the 
legislature 
Magnitude of impact as compared with the baseline scenario (the baseline is indicated as 0): ++ strongly positive; + positive; – – strongly 
negative; – negative; ≈ marginal / neutral;  

++ 

++ 

++ 

++ 

++ 

++ 

++ 

++ 

++ 

++ 

++ 

+ 

+ 

+ 

+ 

+ 

+ 

+ 

+ 

– 

– 

≈ 

≈ 

≈ 

≈ 

6.2.2  Privacy and data protection 

Option 2b: Processing of personal data related to a user’s identity, but not to transaction data  

This  option  would  provide  a  high  level  of  privacy  and  data  protection  for  digital  euro 
transactions. This is in line with expectations of citizens from the targeted consultation.178  

However, this option is only partially effective in meeting specific objective 1. A high level 
of privacy and data protection underpins trust and a wide acceptance and usage. This option 
presents  the  following  disadvantages.  First,  it  would  not  allow  efficient  AML/CFT  checks. 
Supervised  intermediaries  would  not  be  in  a  position  to  perform  customer  due  diligence 
checks on transactions as required under the AML/CFT framework. In particular, transaction 
data  would  not  be  used  to  comply  with  customer  due  diligence  or  reporting  suspicious 
transactions  to  financial  intelligence  units  (FIUs).  This  would  mean  that  the  digital  euro 
online  transactions  would  carry  greater  AML/CFT  risks  than  cash.179  This  could  therefore 
expose  the  Eurosystem  to  reputation  risks  that  may  undermine  a  wide  usage  of  the  digital 
euro.  Second,  this  option  would  not  allow  intermediaries  to  perform  other  activities  that 

178 The targeted consultation indicates that EU citizen respondents did not favour the processing of personal data for any activity related to a 
digital euro. Only 24 out of 188 respondents of EU citizen respondents (13%) thought the processing of personal data for the management of 
operational security risks appropriate, for example. 
179See the risk emphasized in FATF Report to G20 on virtual assets, June 2020:  

67 

 
 
 
 
 
 
                                                           
require  the  processing  of  transaction  data,  (e.g.  taxation,  management  of  operational  ICT 
risks, payment fraud), including to comply with other legislation applicable to payments. In 
addition, this option would not  enable transaction data sharing (upon request of the payers) 
which would be needed to provide some added-value services to users.180  

On the other hand, this option could provide a user of the digital euro with a level of privacy 
similar to  cash.  This  could be key to  promote wide usage of digital  euro. This  would be  in 
line with expectations of citizens from the targeted consultation. Applying the same the same 
AML/CFT  requirements  as  to  cash  would  nevertheless  not  be  effective  in  meeting  specific 
objective 1. 

Cash is subject to limits that vary from one Member States to another181 on AML grounds. 
While  the  AML  package  of  July  2021  provides  for  an  upper  ceiling  of  10,000  EUR  for 
transactions  in  cash,  the  AML  package  follows  a  minimum  harmonization  approach  and 
stricter rules are likely to stay after the adoption of the AML package.182 This means that the 
digital  euro  would  be  subject  to  diverging  rules  in  terms  of  payment  limits  which  would 
undermine its pan European use.  

Limiting  all  digital  euro  payments  to  e.g.  10,000  EUR  as  proposed  for  cash  transactions 
under  the  AML  package  would  not  provide  an  efficient  means  of  payment,  as  certain  use 
cases (e.g. B2B transactions using a conditional euro) do not lend themselves to such limits. 
Finally,  intermediaries  would  bear  cost  related  to  both  the  onboarding  of  customers  and 
transactions,  however  these  costs  will  be  minimal  in  absence  of  transaction  checks  for 
AML/CFT and other purposes, like fraud detection. Based on previous onboarding and due 
diligence processes, most customers of PSPs would automatically qualify for holding digital 
euro. Hence, intermediaries are not expected to bear any significant additional cost related to 
this option. 

For  these  reasons,  this  option  cannot  be  considered  coherent  with  the  applicable  rules  on 
payment transactions. 

Payments  with  a  digital  euro  would  also  bear  cyber  risks.  In  the  case  of  the  online  digital 
euro, cyber and other operational risks would be similar to existing electronic payments  e.g. 
card  payments,  instant  payments.  At  the  same  time,  with  its  centralised  nature,  the  digital 
euro  service  platform  will  face  additional  threats.  Both  the  Eurosystem  and  the  PSPs  have 
adequate systems and procedures to manage this risk and they are also covered by upcoming 
new legislations on cyber resilience. For further information, please, see the Section on cyber 
risks in Chapter 7.2. 

Option 2c: Processing of personal data related to a user’s identity and transaction data  

In  contrast  to  Option  2b,  Option  2c  corresponds  to  the  baseline  scenario  of  existing  digital 
means  of  payments.  Under  Option  2c,  the  digital  euro  would  provide  users  with  the  same 
level  of  privacy  as  current  electronic  payment  solutions  (whereby  identity  and  transaction 

180 In the answer to the targeted public consultation, a small majority of respondents (including EU citizens) believed that users of a digital 
euro should have the possibility to ‘opt-in’ to additional data-driven services. This would also not be consistent with PSD2 requirements for 
payment services providers to provide access to payment account data to third party providers based on customer agreement (open banking), 
181 See Impact Assessment accompanying the AML package of 20 July 2021, COM(2021) 420 final. 19 Member States have introduced or 
are  introducing  limitations  to  cash payments181,  ranging  from  EUR 500  in Greece  to  EUR 10 300  in Czechia, with an  average  value  of 
about EUR 4 500. 
182 The AML framework only provides for minimum harmonization in that field. This allows Member States to keep stricter rules than the 
10,000 EUR ceiling limit.  

68 

 
 
 
                                                           
data are processed by intermediaries), and ensure that supervised intermediaries can meet all 
necessary  AML/CFT  requirements,  as  well  with  other  requirements  that  may  require  the 
processing of transaction data (e.g. taxation, management of operational ICT risks, payment 
fraud).  Option  2c  would  be  consistent  with  PSD2  requirements  for  payment  services 
providers  to  provide  access  to  payment  account  data  to  third  party  providers  based  on 
customer  agreement  (open  banking),  which  is  part  of  the  broader  objective  of  creating  an 
open data framework supported by the Commission’s Data Strategy for Europe. 

Option 2c would be more effective than Option 2b in providing an efficient payment means 
for the EU’s digitalizing economy by allowing – upon customers’ request in accordance with 
GDPR  –  the  use  of  customers’  data  in  line  with  PSD2  ‘open  banking’  provisions  and  the 
Commission’s data strategy. 

Option 2c may not offer the level of privacy similar to cash that citizens may expect from a 
public money. This may undermine the acceptance of the digital euro as pointed out by both 
merchants183  and  users.  A  report  commissioned  by  the  ECB  reached  nevertheless  more 
nuanced conclusions.184 More fundamentally, processing by supervised intermediaries of all 
transaction,  irrespective  of  their  amount  would  risk  making  an  offline  digital  euro 
unattractive  for  users185.  As  a  consequence,  Option  2c  for  all  transactions  would  not  be 
effective in meeting specific objective 1 (present, available and accepted by everyone).186 

Under this option, intermediaries would bear not only the cost of onboarding but also need to 
carry out transaction checks for AML/CFT and fraud detection purposes. Since they already 
have automated processes to check similar transactions in commercial bank money (and will 
develop them further for instant payment services), their cost are not expected to significantly 
change  under  this  policy  option.  This  has  been  confirmed  by  the  Commission’s  targeted 
consultation.  Intermediaries  acting  as  obliged  entities  expect  that  the  AML/CFT  checks  of 
transactions in a digital euro would be similar to today’s processes thus on-going costs would 
also be similar however it would require initial setup costs. 

That option is fully consistent with the AML/CFT framework governing funds and means of 
payments,  other  applicable  rules  to  electronic  payments,  as  well  as  PSD2  open  banking 
provisions and the Commission’s data strategy. 

As for other means of payment, online digital euro may be subject to simplified due diligence 
which would require a “sufficient monitoring” of transaction data in  accordance with AML 
rules187,  including  under  the  Transfer  of  Fund  Regulation.  This  means  that  personal  data 
pertaining to  an online lower value/lower risk digital  euro transaction may  be processed by 
intermediaries in line with the risk-based approach to conduct AML checks and transaction 

183 ECB, Eurosystem report on the public consultation on a digital euro, April 2021. “Half of professionals (especially merchants) are also of 
the opinion that a degree of privacy would be necessary for a digital euro to be adopted widely”.  
184 Study on New Digital Payment Methods, March 2022, Kantar: “Several participants among the general public, but also the tech-savvy, 
indicated they do not really think about privacy when making payments. The availability of flexible privacy settings that can be adjusted to 
suit the payment occasion, however,  could be an additional feature to drive adoption. Most respondents would opt for a medium level of 
financial privacy without special concerns for the visibility of their transactions to their banks as long as they could avoid exposure to bank 
advertising”.   
185 According to ECB public consultation, “When confronted with a specific choice between an offline digital euro focused on privacy, an 
online one with innovative features and additional services, and a combination of the two, citizen respondents generally opt for an offline 
solution focused on privacy, while professional respondents consider a hybrid approach more appealing” 
186 An offline digital euro solution is peer-to-peer and therefore does not allow for ongoing transaction monitoring.  
187 The new AML framework would provide for harmonised simplified due diligence (i.e. AMLA Regulatory Technical Standard) for low 
risk transactions on the basis of a supra-national risk assessment carried out by Commission.  According to Article 15 AMLD, even in the 
event  of  simplified  due  diligence,  obliged  entities  shall  carry  out  sufficient  monitoring  of  the  transactions  and  business  relationships  to 
enable  the  detection  of  unusual  or  suspicious  transactions.  A  simplified  due  diligence  regime  therefore  requires  transaction  monitoring 
checks. 

69 

 
 
                                                           
monitoring, where needed. The transfer of fund Regulation (TFR) includes the possibility to 
reduce  the  information  accompanying  certain  digital  euro  transactions  below  a  threshold. 
Currently,  simplified  due  diligence  (SDD)  is  not  harmonised  across  the  EU  and  its 
application  differs  considerably  across  obliged  entities.  The  AML  package  adopted  in  July 
2021  aims  at  harmonizing  simplified  due  diligence  across  the  EU,  which  would  be  of 
particular relevance for the digital euro as a pan Euro-Area payment instrument. 

Option 2d: Processing of personal data related to a user’s identity, but not to transaction data 
for offline low value payments – non exclusive  

In  terms  of  privacy  and  data  protection,  Option  2d  goes  beyond  the  current  baseline  for 
electronic  payments  by  offering  users  traceability  of  offline  transactions  similar  to  cash.  A 
higher level of privacy and data protection for offline low value transactions under option 2d 
could facilitate the acceptance of digital euro that would have more cash-like features (offline 
functionality,  peer-to-peer  validation  of  transactions,  and  high  level  of  privacy)  for  lower-
value  payments.  Citizens  expressed  clear  preference  for  high  level  of  privacy  in  both  the 
ECB’s and Commission’s consultations. Indeed, the targeted consultation has shown that EU 
citizens are in favour of all features that enhance user privacy  – with the ability to hide the 
identity of a payer and payee proving to be the most popular feature.188 

Money  laundering  and  terrorist  financing  risks  would  be  lower  than  under  option  2e,  as 
offline  low  value  payments  would  be  limited  to  proximity  (face-to-face)  payments,  thereby 
replicating the limitations on portability that come with physical cash. According to the ECB 
consultation, this type of digital euro is favoured also by merchants.189 

Option 2d means that low value offline transactions are not monitored unless an AML/CFT 
investigation mandates inspection, which echoes views expressed by EDPB in its reply to the 
targeted  consultation.190  Beyond  ensuring  privacy,  an  offline  solution  that  replicates  more 
cash-like use could  be attractive from a  financial inclusion perspective and would facilitate 
the universal acceptance of the digital euro for all citizens and visitors (due to its ability to be 
used in remote areas without an online connection and due to the possibility to onboard based 
on  simplified  due  diligence.  Option  2d  refers  to  what  the  ECB  labels  a  digital  euro  type  1 
(offline  payment191).  An  offline  digital  euro  is  therefore  essential  in  supporting  the 
acceptance of the digital euro, as pointed out by a study commissioned by the ECB.192 

An offline digital euro could also increase the resilience of the European payment landscape 
by  ensuring  the  continuous  provision  of  offline  payments  in  public  money  amidst 

188 According to the targeted consultation, 152 out of 312 respondents (49%) considered it appropriate to mask the identity of the payer or 
the payee to each other (‘peer-to-peer pseudonymity’). Moreover, (43%) of EU citizen respondents believe that a high level of privacy for 
low value transactions is either very appropriate or rather appropriate. Further, more than 50% of the professional stakeholders opted in 
favour of linking the digital euro to the European Digital Identity Wallet 
189 “A quarter support selective privacy under which transactions below a given amount would stay private (mostly credit institutions and 
PSPs)” 
190 EDPB suggested “no transaction monitoring under a certain threshold, and without upload of the corresponding transaction history from 
the  intermediary.  In  case  unlawful  transactions  have  taken  place  nevertheless,  they  would  be  identifiable  by  the  authorities  if  public 
prosecution  is  launched as they  would be  only  pseudonymous.  Therefore,  this  feature does  not  seem  to  raise much  challenge  in  terms  of 
AML/CFT prevention”.   
191  Offline  payments  pertain  to  transactions  that  are  settled  offline  between  payer  and  payee  in  physical  proximity.  Offline  functionality 
would  provide  users  with  private  transactions  and  holdings,  as  transactions  would  be  person-to-person  and  would  not  require  an 
intermediary. See Annex 5 for more details.  
192  See  Kantar  report  on  new  digital  payment  methods  that  surveyed  the  attitudes  of  unbanked/underbanked  population  toward  digital 
payment methods. That survey particularly stressed that a digital euro should be easy to use without requiring technological skills and have 
the possibility to for offline usage without an internet connection 

70 

 
 
                                                           
connectivity  outages  and  in  the  context  of  a  declining  use  of  cash.193  This  would  make 
payments  more  efficient  in  a  digitalised  economy,  in  keeping  with  specific  objective  1. 
Compared  to  an  option  where  ongoing  monitoring  is  required,  due  to  the  offline  nature, 
intermediaries would save costs on the monitoring of transactions. 

This option is consistent with the June 2020 report of FATF on virtual currency that noted “at 
the design stage of the CBDC, the issuer can make design decisions that reflect and mitigate 
the AML/CTF risks posed by the CBDC. This, for example, could include limiting the ability 
for anonymous peer-to-peer transactions to occur with the CBDC”. Subject to limitations, this 
approach would appear to be consistent with the risk-based approach underpinning the AML 
framework.  

Offline payments raise questions about operational cybersecurity. For offline payments with a 
digital euro, the cyber risk is different as for online digital euro holdings and transactions. As 
once  the  devices  used  for  offline  digital  euro  are  issued  and  funded,  their  digital  euro 
holdings and the transactions are not validated in real time by either a PSP or the Eurosystem. 
Illegitimate change in  balances and double spending have to  be avoided. To achieve this, a 
tamper-proof  secure  hardware  solution  is  required.  The  corresponding  hardware-software 
solution needs to be developed and procured by actors within the digital euro ecosystem. The 
cost of this investment cannot be estimated at this stage. 

Option 2e: Processing of personal data related to a user’s identity, but not to transaction data 
for online low value payments – non-exclusive option 

In  terms  of  privacy  and  data  protection,  Option  2e  goes  beyond  the  current  baseline  for 
electronic  payments  by  offering  users  more  privacy  for  conducting  their  online  low-value 
transactions.  A  higher  level  of  privacy  under  option  2e  could  facilitate  the  acceptance  of 
digital euro by people that are not willing to share data about their transactions. This is all the 
more relevant  in  a  context  of growing e-commerce and declining cash usage, in  which this 
option would protect individual right and desire for privacy. 

That said, money laundering and terrorist financing risks would be higher than under option 
2d, as online low value payments would not be limited to proximity (face-to-face) payments. 
Option  2e  would  entail  reputational  risk  for  the  ECB  as  issuer  of  a  digital  currency  and 
undermine the Union policy as the combination of anonymity, portability and mass adoption 
would be highly attractive to criminals and terrorists.  

This  policy  option  would  be  effective  in  providing  privacy  of  transactions  for  users  that 
would  further  support  its  acceptance  and  usage.  Nevertheless,  online  low-value  payments 
may increase AML/CFT risks, as unlike offline low-value payments (option 2d) they would 
not be limited to proximity payments. 

Under  this  option,  compared  to  other  options  where  monitoring  is  required,  intermediaries 
would  save  some  but  not  significant  cost  on  monitoring  low  value  online  transactions.  For 
electronic  payments,  most  of  the  costs  are  permanent  and  relate  to  the  IT  infrastructure. 
However, because of fewer number of monitored transactions, compared to other options, the 
number  of  potential  alerts  that  may  require  manual  checks  would  also  be  fewer,  thus 
implying  savings  of  some  costs.  On  the  other  hand,  machine  learning  tools  used  for 

193  However,  the  offline  digital  euro,  due  to  the  necessary  pre-funding  step,  would  need  to  be  sufficiently  used  in normal  times  to  foster 
resilience effectively. This is akin to the need of withdrawing cash in advance of the ATM network outage. 

71 

 
 
                                                           
monitoring  may  not  be  able  to  improve  as  much  as  under  options  where  a  larger  set  of 
transactions is processed, potentially leading to  a relatively larger number of false positives 
requiring  manual  checks.  Overall,  no  significant  impact  on  costs  is  expected  under  this 
option. 

By  not  providing  the  possibility  to  intermediaries  to  process  low  value  transaction  data, 
Option  2e  does  not  take  into  account  the  particular  risk  profile  of  central  bank  digital 
currencies. As emphasized by FATF, CBDCs could present greater AML/CFT risks than cash 
as  it  would  be  acting  as  an  instrument  with  the  liquidity  and  privacy  similar  to  cash  but 
without  the  limitations  on  portability  that  come  with  physical  cash.  In  addition,  that  option 
would not be consistent with the existing AML framework whereby online electronic means 
of payment are subject to AML/CFT checks irrespective of any threshold in case of suspicion 
of money laundering or terrorist financing.  

Stakeholders’ views on all options 

Member States expressed broad support to explore a risk-based approach on how to “allow 
for  more  privacy  in  particular  in  the  case  of  low  value  transactions  which  pose  less  risk  in 
terms  of  violation  of  the  relevant  EU  law”.194  There  was  also  support  to  explore  an  offline 
functionality for the digital euro, limited to low value payments in close proximity. Option 2d 
was supported by the EDPB in its answer to the public consultation.195 

In their answers to Commission’s targeted consultation, PSPs emphasized the need to subject 
the digital euro to the same privacy and AML framework as private means of payment (i.e. 
option 2c.196 On the other hand, the targeted consultation indicates that citizens are in favour 
of  features  that  enhance  user  privacy  –  with  the  ability  to  hide  the  identity  of  a  payer  and 
payee  for  low-value  transactions  proving  the  most  popular  feature  (43%).  This  suggests 
support for option 2d. 

Answers to the ECB consultation seem to suggest a combination of option 2c and 2d.197  

Conclusion 

By  offering  more  cash-like  features  and  allowing  offline  use,  option  2d  would  be  more 
effective than 2c (in achieving the specific objective 1 to promote the wide acceptance of the 
digital euro. Option 2e will provide for online payments the similar level of privacy as option 
2d provides for offline proximity payments, which would further support broader acceptance 
and  trust  by  users.  Option  2c  will  be  more  effective  than  option  2e  in  bringing  about  an 
efficient means of payment for online payments to support the digitalized economy (specific 
objective 1) as option 2c allows, in accordance with EU data protection rules, the sharing and 
reuse  of  users’  data  to  intermediaries,  in  line  with  PSD2  ‘open  banking’  requirements  and 
consistent with the objectives of the European Data Strategy. 

194 See the letter by Eurogroup’s President to members of the Eurogroup.  Main results of the Eurogroup, 4 April 2022, “A risk-based 
approach could be followed to allow for more privacy in the case of less risky and smaller transactions” 
195  The  EDPB  noted  «With  regard  to  transaction monitoring […],  the  EDPB’s  proposal  is the  complete  absence of  checks  (and not  only 
simplified checks) under a certain threshold of low value transactions, as it is the case for the cash today, while higher value transactions 
would remain subject to standard controls. This would be best implemented on the bearer-based modality, available offline. This would not 
be feasible for the account-based modality. 
196 In its answer to the targeted consultation, the European Banking Federation particularly the need to ensure “a level playing field between 
different digital means of payment” 
197  According  to  the  ECB  public  consultation  on  a  digital  euro,  “when  confronted  with  a  specific  choice  between  an  offline  digital  euro 
focused  on  privacy,  an  online  one  with  innovative  features  and  additional  services,  and  a  combination  of  the  two,  citizen  respondents 
generally opt for an offline solution focused on privacy, while professional respondents consider a hybrid approach more appealing”. 

72 

 
 
                                                           
As regards the coherence of the above options with other policies of the EU, while option 2c 
would be more coherent  with  the Commission’s agenda of ensuring  an efficient AML/CFT 
framework than the other options, it would not provide a higher level of privacy than existing 
means  of payment. Given user expectations for high cash-like privacy, this  may undermine 
the effectiveness of option 2c in meeting specific objective 1 (acceptance of the digital euro). 
On balance, option 2d achieves more coherence with the public policy objectives of the EU 
by  providing  a  high  level  of  privacy  for  low-value  proximity  transactions  in  a  way  that  is 
consistent  with  the  risk-based  approach  underpinning  the  Union’s  AML/CFT  framework. 
Options  2c  and  2d  are  more  coherent  than  options  2e  in  terms  of  ensuring  an  efficient 
AML/CFT  framework.  Option  2e  could  entail  higher  money  laundering  and  terrorist 
financing  risks  than  option  2d,  as  online  low  value  payments  would  not  be  limited  to 
proximity (face-to-face) payments.  

Given the above, option 2d would achieve a better balance between privacy and traceability 
for  lower  value  offline  payments,  while  option  2c  would  be  the  preferred  option  for  online 
transactions.  In  keeping  with  the  objective  of  the  AML  package  adopted  in  July  2021,  the 
extent of transaction monitoring under option 2d may need to be adjusted, after the issuance 
of  the  digital  euro  based  on  a  review  and  on  the  basis  of  a  risk  assessment  of  money 
laundering  and  terrorist  financing  threat.  This  is  consistent  with  FATF  recommendation  to 
design AML regime on the basis of a risk assessment.198 

198 According to FATF, both jurisdictions and financial institutions must identify and assess the money laundering or terrorist financing risks 
that may arise in relation to (a) the development of new products and new business practices, including new delivery mechanisms, and (b) 
the  use  of  new  or  developing  technologies  for  both  new  and  pre-existing  products,  See  FATF  recommendation  15  on  new  technologies: 
https://www.fatf-gafi.org/media/fatf/documents/recommendations/pdfs/FATF%20Recommendations%202012.pdf 

73 

 
 
 
 
                                                           
Table 5. Comparison of options aimed to ensure that the central bank issued money, the 
euro can meet the payment needs in the digital age – Privacy and data protection 

Option 

Effectiveness 

Efficiency 
(cost-
effectiveness) 
0 

Coherence 

Overall 
score 

0 

0 

0 

+ 

+ 

– – 

Do nothing – no digital euro 
Privacy 
Option 2b – Processing of personal data related to 
a user’s identity, but not to transaction data 
Option 2c – Processing of personal data related to 
a user’s identity and transaction data 
Option 2d – Processing of personal data related to 
a user’s identity, but not to transaction data for 
offline low value payments – non-exclusive 
option 
Option 2e - Processing of personal data related to 
a user’s identity, but not to transaction data for 
online low value payments – non-exclusive 
option 
Magnitude  of  impact  as  compared  with  the  baseline  scenario  (the  baseline  is  indicated  as  0):  ++  strongly  positive;  + 
positive; – – strongly negative; – negative; ≈ marginal / neutral;  

– – 

++ 

++ 

++ 

++ 

++ 

+ 

+ 

+ 

+ 

+ 

≈ 

≈ 

6.2.3  Financial stability and credit provision 

Option 3a: Digital euro with unrestricted store of value function 

If a digital euro can be held without any limits, people and businesses would benefit from a 
central bank currency that would fulfil all the functions of money, including being a means of 
payment and a store of value. An unrestricted digital euro could therefore be comparatively 
more  attractive  for  users  and  thus  also  more  competitive  with  newly  emerging  forms  of 
digital payments (e.g. stablecoins).  In addition, the digital euro may be seen as a safety net 
especially  for  depositors  with  balances  above  the  coverage  limit  of  EU  deposit  guarantee 
schemes  of  EUR  100.000.199  As  such,  an  unconstrained  digital  euro  would  seem  to  be 
effective in reaching a wide use and thus achieving specific objective 2 aiming to increase the 
euro’s  competitiveness  vis-à-vis  other  currencies,  foreign  CBDCs  and  stablecoins.  At  the 
same  time,  however,  this  would  come  at  the  expense  of  creating  risks  to  financial  stability 
which would eventually put the efficiency of this option into question (for further details of 
the  following  assessment  of  options  3a  and  3b,  please  consult  Annex  11).  If  the  risks  to 
financial  stability  and  credit  provision  were  to  materialize,  it  would  furthermore  severely 
hamper  reaching  the  general  objective  of  ensuring  that  the  euro  can  support  the  EU’s 
economy in the digital age.  

In case of large-scale deposit reduction in favour of a digital euro, banks could face liquidity 
stress  and  increased  funding  costs  that  may  translate  to  lower  credit  provision  to  the 
economy.  Furthermore,  in  crisis  times,  banks  would  more  likely  experience  funding 
difficulties  putting the stability of the financial system at  risk. Banks  are currently the only 
actors able to  create money, which  enables them to  engage in  large-scale maturity  and risk 
transformation  and  thus  gives  them  a  central  role  in  credit  provision  to  the  European 
economy.  In  the  absence  of  sufficiently  scaled  alternatives  to  bank  lending,  bank 
disintermediation  thus  implies  considerable  risk  for  firms’  access  to  credit  and  thus  for 
overall  economic  growth.  The  aforementioned  impacts  would  affect  individual  banks 

199  Directive  2014/49/EU  on deposit  guarantee  schemes  provides  protection  to  depositors  of  all  credit  institutions  within a  100.000  EUR 
limit (all aggregated accounts of a single depositor at a same bank). 

74 

 
 
                                                           
differently,  where  banks  that  rely  to  a  large  extent  on  deposit  funding  and  with  smaller 
liquidity buffers would be expected to be impacted more strongly.200 

Whether  or  not  structural  disintermediation  risks  would  actually  materialize,  depends 
crucially  on  the  take-up  of  a  digital  euro  and  the  extent  to  which  a  digital  euro  would 
substitute  cash  or  deposits,  both  of  which  are  difficult  to  forecast,  and  in  any  case  may 
significantly  vary  with  economic  circumstances  such  as  the  interest  rate  environment. 
Furthermore, external  factors such as the level  of excess  reserves and collateral  availability 
would play a crucial role in determining whether deposit outflows would translate into lower 
lending.  Similarly,  the  impact  on  banks’  funding  cost  is  difficult  to  ascertain  a  priori  and 
depends inter alia on the interest rate and liquidity environment as well  as banks' individual 
balance  sheet  position.  Possible  higher  bank  funding  costs  may  translate  to  higher  interest 
rates  on  bank  loans  for  businesses  and  households  and/or  negatively  impact  bank 
profitability.201 Indeed, a static assessment indicates that a large substitution from deposits to 
digital euro would decrease banks’ profitability substantially. 

Hence, banks’ ability to adjust to the demand for the digital euro should be further assessed 
as the issuance date gets closer. It should be noted that ultimately, the central bank could also 
step-in  in  extreme  scenarios,  providing  additional  liquidity  by  accepting  eligible  assets  as 
collateral for secured lending.202 However, a structurally expanded liquidity provision by the 
central  bank  beyond  certain  levels  may  either  lead  to  shortage  of  high-quality  liquid  assets 
used  as  collateral  and  thus  impact  the  efficiency  of  the  interbank  market  and  the  central 
bank’s implementation  of monetary policy or imply higher risk taking for the central  bank. 
Lastly, risks to bank intermediation may also arise from ongoing and future developments in 
digital payments independently from a digital euro, for instance if the role of stablecoins as a 
common means of payment increases.   

The increased liquidity risk for banks, especially in crisis times, would also increase the risk 
of costly  government  intervention to  stabilise ailing banks and safeguard  financial stability. 
At the same time, the US Treasury Department argues203 that banks’ fears that a digital dollar 
would  lead  to  the  loss  of  depositors  and  even  bank  runs  is  overblown.  They  argue  that  a 
properly designed digital dollar would “stabilize rather than destabilize the financial system.” 
A  digital  dollar  would  provide  regulators  with  an  early  warning  system,  allowing  them  to 
identify weak banks before a run begins.  

According  to  an  ECB  occasional  paper,204  illustrative  demand  scenarios  suggest  possible 
deposit outflows ranging from EUR 180 billion to EUR 6.3 trillion, accounting for 0.5% to 
18%  of  aggregate  euro  area  bank  liabilities.  The  scenarios  designed  by  the  ECB  research 
range from just under €500 billion digital euro take-up in a moderate demand scenario to just 
over  EUR  7  trillion  in  a  large  take-up  scenario.  According  to  the  simulations  of  the  ECB, 
based  on  the  economic  conditions  in  2021,  euro-area  banks  could  manage  the  moderate 
demand  scenario  with  a  large  leeway.  In  the  large  take-up  scenario,  however,  banks  would 
have  to  rely  on  central  bank  funding  provided  against  collateral  entailing  a  significant 
expansion of the Eurosystem’s balance sheet. 

200  Available  data  suggests  that  larger  banks  seem  to  rely  less  on  deposit  funding  than  smaller  banks.  This  points  to  a  “hub  and  spoke” 
structure where wholesale funding is handled preferentially by larger banks, who then redistribute it to smaller banks and/or to individual 
subsidiaries within groups. 
201 Once again, factors like individual banks’ net interest margins and the price elasticity of credit demand would play a crucial role in the 
eventual outcome. 
202  In  a  crisis  situation,  supervisors  and  resolution  authorities  could  furthermore  intervene  within  the  scope  of  their  respective  mandates. 
However, such interventions presume that one or more banks are already endangered.  
203 https://www.financialresearch.gov/working-papers/files/OFRwp-22-04_central-bank-digital-currency.pdf 
204 Adalid et al. (2022), “Central bank digital currency and bank intermediation”, ECB Occasional Paper Series 293, May 2022 

75 

 
 
                                                           
Expanding  the  analysis  made  by  the  ECB,205  a  study  by  the  Commission’s  Joint  Research 
Centre assessed the implications of digital euro take-up scenarios ranging from EUR 1,000€ 
to  EUR  14,000  per  person  on  a  bank-by-bank  and  country-by-country  basis.  In  the  EUR 
3,000  per  person  take-up  scenario,  banks  representing  about  5%  of  total  assets  in  the  euro 
area  would  not  be  able  to  cover  the  migration  of  deposits  to  digital  euro  with  their  free 
reserves  and  banks  representing  about  15%  of  total  assets  in  the  euro  area  would  see  their 
reserves  decrease  by  more  than  50%.  Considering  consolidated  balance  sheets,  in  several 
Member States, over half of banks would have to increase wholesale funding by more than 
20%  in  order  to  compensate  the  loss  of  deposits.  At  the  euro-area  aggregate  level,  30%  of 
banks  would  need  to  increase  wholesale  funding  by  less  than  10%  (in  relative  terms, 
compared to  current  levels), 50% of banks  would need to increase it by  less than 20%, but 
25% of banks would need a large increase of more than 50%. The disparity between Member 
States  is  quite  marked,  even  more  when  considering  un-consolidated  data.  This  study  also 
shows  that  a  CBDC  might  lead  to  substantial  challenges  for  the  profitability  of  banks, 
especially for small banks that mostly rely on deposits as a source of funding. Large banks 
and  countries  where  the  banking  business  is  more  diversified  are  less  vulnerable  to  the 
introduction of CBDC. While the impacts will vary bank by bank, the impact on the financial 
system and especially on credit provision will depend more on the overall impact. Under this 
option, PSPs and merchants would not have additional compliance and administrative costs.  

This option is consistent with the other form of central bank money (i.e. cash) whose store of 
value function is not limited. However it may not be consistent with the Commission’s and 
the  ECB’s  respective  mandates  with  regard  to  ensuring  financial  stability  and  maintaining 
efficient monetary transmission. 

Option 3b: Possibility of introducing limits to the digital euro’s store of value function 

Tools  to  limit  the  digital  euro’s  store  of  value  function  such  as  holding  limits,  conversion 
limits or remuneration-based disincentives, could mitigate the risks to both credit provision to 
the  economy  and  financial  stability,  which  would  be  a  significant  benefit  for  credit 
institutions  and  the  Eurosystem  that  in  turn  would  benefit  consumers  and  businesses.  The 
possibility  to  deploy  such  tools  would  be  provided  for  in  legislation,  together  with  their 
objectives  and  clear  criteria  for  their  use  by  the  Eurosystem.  This  includes  the  requirement 
that  any  such  instruments  should  not  unduly  constrain  the  digital  euro’s  payment 
functionality.  On  the  basis  of  the  Regulation,  the  definition  of  such  tools  as  well  as  the 
decision on their use and their parameterisation would rest in the hands of the Eurosystem as 
part  of  its  role  in  supporting  financial  stability  in  order  not  to  interfere  with  the  ECB’s 
exclusive competence of defining and implementing monetary policy. 

Limits  on  individual  digital  euro  holdings  would  imply  a  maximum  possible  drawdown 
amount  on  the  banking  sector  deposit  base  both  in  normal  times  and  during  crises. 
Unfavourable interest rates applied on digital euro holdings above certain thresholds (“tiered 
interest rates”) would have a similar effect, but their effectiveness may be lower in times of 
crisis.   

Option  3b  would  protect  financial  stability  and  safeguard  credit  provision  to  the  economy 
while option 3a would pose risks to them. According to the ECB, an individual holding limit 
of EUR 3000 would limit the overall supply of digital euro to a maximum of EUR 1 trillion 
and the substitution from deposits would be lower, as some substitution from cash (instead of 
deposits)  can  also  be  assumed.  The  ECB’s  simulations  suggest  that  under  such  a  holding 

205 Adalid et al. (2022), “Central bank digital currency and bank intermediation”, ECB Occasional Paper Series 293, May 2022 

76 

 
 
                                                           
limit, banks would still be able to orderly adjust to the deposit outflows, largely drawing on 
current excess reserve holdings. This implies that the digital euro’s impact on banks’ funding 
costs  could  be  mitigated  under  option  3b,  which  may  also  benefit  financing  costs  for 
households  and  businesses.  The  ECB  simulations  also  suggest  that  holding  limits, 
remuneration disincentives and conversion limits can lower the scale and speed of simulated 
economy-wide  bank  runs  and  can  even  have  an  overall  stabilising  effect  under  certain 
circumstances. A static Commission assessment highlights that capping digital euro holdings 
would be a way to foster macroeconomic stability and preserve banks’ profitability. For these 
reasons, limits on CBDC holdings may be justified from both a micro and macro prudential 
viewpoint.206 

While  option  3b  would  be  more  protective  of  the  EU’s  financial  stability  and  the  banking 
sector’s  intermediation  capacity,  it  might  be  somewhat  less  effective  than  option  3a  in 
ensuring acceptance by everyone (part of specific objective 1) and also in achieving specific 
objective 2 aiming to increase the euro’s competitiveness vis-à-vis other currencies, foreign 
CBDCs  and  stablecoins,  which  may  not  have  any  use  restrictions.  Under  this  option,  users 
might perceive that the digital euro cannot fulfil an important function of money i.e. store of 
value,  and  might  favour  other  forms  of  the  euro  or  other  foreign  denominated  currencies. 
That is, implementation of limits to the store of value function could negatively influence the 
overall attractiveness and convenience of the digital euro and could reduce demand and use. 
Tools to limit the digital euro’s store of value function may also add operational complexity, 
increase compliance costs for intermediaries and  make the digital  euro  cumbersome to  use. 
Lastly,  limits  to  the  store  of  value  function  would  constrain  its  use  as  a  reserve  asset 
(provided that international access is granted – see Options 4a to 4c) and would also curb the 
digital  euro’s  potential  in  use  for  international  trade.  Mechanisms  that  ensure  an 
unconstrained payment function even in the presence of holding limits should apply both in 
the domestic and international context. 

Overall, option 3b can, however, be considered  more efficient than option 3a, in that it – if 
well parametrised – reaches the objective of making the digital euro available and accepted, 
because  people  could  still  benefit  from  an  unconstrained  payment  functionality  of  a  digital 
euro, while mitigating the risks for the financial system and thus being less burdensome for 
banks and the Eurosystem. By mitigating risks to the financial system and intermediation, it 
would  also  not  put  reaching  the  general  objective  of  supporting  the  EU’s  economy  in  the 
digital  age  at  risk.  The  trade-offs  described  in  this  section  would  depend  crucially  on  the 
eventual  parametrisation  of  any  such  instrument,  which  would  be  decided  on  by  the 
Eurosystem. For instance, a very high holding limit can be considered to have a less adverse 
effect  on  the  digital  euro’s  attractiveness  vis-à-vis  other  currencies,  foreign  CBDCs  or 
stablecoins, but would also entail significantly less protection against financial stability risks 
and bank disintermediation. Conversely, a rather low holding limit would effectively address 
financial stability concerns but could significantly impact the digital euro’s attractiveness and 
take-up  and  increase  complexity  for  users.  As  described  above,  the  digital  euro’s  payment 
functionality  should  not  be  impaired  under  both  scenarios.  The  above  reasoning  can  be 
applied  to  other  tools  as  well,  where  for  instance  a  low  threshold  for  interest  rate 
disincentives  or  very  unfavourable  remuneration  would  be  comparatively  more  effective  in 
addressing financial stability and disintermediation concerns but would come at the detriment 
of the digital euro’s attractiveness.  

206  For  a  more  detailed  discussion  of  a  model-based  assessment  of  the  impact  of  a  CBDC  on  financial  stability  and  the  broader 
macroeconomy, see Annex 11. 

77 

 
 
                                                           
PSP’s total one-off costs under option 3b would be similar to option 3a since PSPs already 
run  IT  mechanisms  to  handle  similar  limits  (e.g.  daily  withdrawal  or  transfer  limits),  and 
interest  rates. No different, additional administrative burden is  expected to derive  from  this 
option  compared  to  option  3a  for  the  private  sector,  as  reporting  on  payments  is  already  a 
requirement, which would need only some expansion.  

As regards consistency, Option 3b is in line with G7 principles on retail CBDC.207  

Stakeholders’ views on all options 

53  out  of  124  professional  respondents  (43%),  mostly  financial  institutions  and  to  a  lesser 
extent  payment  services  providers  and  market  infrastructures,  considered  that  limiting  the 
store  of  value  function  of  the  digital  euro  by  introducing  holding  caps,  limitations  to 
transactions, or different interest and/or fees disincentives on large holdings would be rather 
or  very  important  for  financial  stability  purposes,  in  order  to  prevent  bank  runs  in  crisis 
situations  or  to  prevent  structural  disintermediation  of  financial  intermediaries.  Around  a 
third  of  the  banks  that  supported  limiting  the  store  of  value  function  of  the  digital  euro 
stressed  at  the  same  time  that  maintaining  limits  could  face  difficulties  in  the  long-term 
owing to social and political pressure. 21 out of 124 professional respondents (17%) did not 
consider  important  to  limit  the  store  of  value  function  of  the  digital  euro  or  expressed 
opposition  to  it.  7  (6%)  were  neutral  and  43  (35%)  did  not  reply.  About  20  citizens  (11%) 
supported  and  62  (33%)  opposed  limiting  the  holdings  of  digital  euro  (100  (54%)  did  not 
answer and 7 (4%) were neutral).  

42 out of 124 professional respondents (34%) considered that a digital euro without limits or 
disincentives  would have a negative impact  on the volume of  retail  deposits,  39 out of 124 
professional respondents saw an increased risk of a bank run (31%) and 38, mostly financial 
institutions, considered that there would be a negative impact on banks’ net interest income 
and revenues from fees (31%). 29 out of 124 of professional respondents (23%) considered 
that  a  digital  euro  without  limits  or  disincentives  would  have  a  negative  impact  on  credit 
provision in the economy. 

In  the  ECB’s  public  consultation,  almost  half  of  citizen  respondents  mentioned  a  need  for 
holding  limits,  tiered  remuneration,  or  a  combination  of  the  two,  to  manage  the  amount  of 
digital euro that would be in circulation. A similar share of professional respondents agreed. 
Tiered  remuneration  was  especially  popular  among  the  research  community,  while  holding 
limits were favoured by credit institutions. 

Conclusion 

While option 3a may be more effective in reaching a wide use and acceptance of the digital 
euro  due  to  the  absence  of  limits,  option  3b  would  be  more  effective  at  simultaneously 
safeguarding  financial  stability  and  thus  can  be  considered  more  efficient  as  the  cost  of 
creating risks to the EU’s financial stability and the banking sector’s credit provision capacity 
is substantial without limiting the store of value function of the digital euro.  In any case, if 
properly designed, the digital euro even with limits or disincentives may still facilitate access 
to  payments,  reduce  transaction  costs  by  increasing  competition  and  preserve  financial 
stability.  

207 Principle 1: Any CBDC should be designed such that it supports the fulfillment of public policy objectives, does not impede the central 
bank’s ability to fulfill its mandate and ‘does no harm’ to monetary and financial stability. 

78 

 
 
                                                           
Efficiency 
(cost-
effectiveness) 
0 

Table 6. Comparison of options aimed to ensure that the central bank issued money, the 
euro can meet the payment needs in the digital age – Financial stability 

Option 

Effectiveness 

Coherence 

Overall score 

0 

Do nothing – no digital euro 
Financial stability 
Option 3a – Digital euro with unrestricted 
store of value function 
Option 3b – Possibility of introducing limits 
to the digital euro’s store of value function 
Magnitude  of  impact  as  compared  with  the  baseline  scenario  (the  baseline  is  indicated  as  0):  ++  strongly  positive;  + 
positive; – – strongly negative; – negative; ≈ marginal / neutral;  

++ 

++ 

++ 

+ 

+ 

≈ 

≈ 

0 

0 

– 

7  Preferred policy option 

7.1 

Preferred policy option 

The general objective of the present initiative is to ensure that central bank issued money can 
support the EU’s economy in the digital age. The introduction of a digital euro would ensure 
that central bank money remains present, available and accepted by everyone also in the EU’s 
digitalizing economy. It can offer state-of-the-art,208 efficient payment means, pan-European 
reachability  and  increase  the  euro’s  competitiveness  vis-à-vis  other  currencies,  third 
countries-issued CBDCs and stablecoins. 

As set out in Section 5.1 and 6.1 above, the impact of establishing a digital euro depends - to 
a  significant  extent  -  on  how  its  essential  aspects  are  regulated.  In  section  6,  the  impact  of 
different options for these essential aspects has therefore been analysed.  

Based  on  the  discussion  in  section  6,  to  achieve  the  objectives  in  a  most  effective  and 
efficient  way  the  digital  euro  established  by  the  Regulation  should  have  the  following 
essential features (preferred policy options): 

  The digital euro should be granted legal tender status with an obligation for all payees 
to accept it, with some justified and proportionate exceptions to avoid overburdening 
merchants and exclude natural persons acting in a household or personal capacity.  

  Both an obligation on credit institutions with retail business209 to distribute the digital 
euro  or  voluntary  distribution  by  PSPs  subject  to  a  review  clause  could  make  the 
digital euro adequately available for users and merchants.  

  To ensure coherence in the regulatory treatment of the two forms of the euro, the legal 
tender  status  of  the  digital  euro  would  be  accompanied  by  a  codification  and 
clarification of the scope and effects of the legal tender of euro cash. The regulation 
on  the  euro  cash  would  also  provide  for  an  obligation  on  Member  States  to  ensure 
sufficient and effective access to cash and where necessary to implement measures to 
that end.  

  To  avoid  overcharging  merchants,  maximum  mandatory  caps  should  be  determined 
on the basis of a methodology set by the legislature and developed by the ECB. The 

208 See Annex 8 on the evolution of the internet and payment needs of industry 4.0. 
209 All other PSPs would be free to distribute the digital euro if they decide so. 

79 

 
 
                                                           
Regulation  should  include  precise  criteria  for  the  ECB  to  make  the  relevant 
calculation to determine the maximum caps. e.g. fees oriented to costs or comparable 
to  similar  payments’  fees,  ensure  sufficient  network  effects,  no  excessive  fees  for 
merchants, no crowding out of private means of payment.  

  The  digital  euro  should  provide  for  a  high  level  of  privacy  for  low  value  offline 
payments  which  have  cash-like  features  unless  further  risk  assessment  carried  out 
after  the  establishment  of  the  digital  euro  concludes  that  a  higher  degree  of 
traceability  should  be  required.  Other  digital  euro  transactions  would  be  treated  the 
same way as other electronic means of payment in terms of privacy and application of 
AML  requirements  (and  while  ensuring  harmonised  application  of  customer  due 
diligence  across  Member  States,  including  the  possibility  to  rely  on  simplified  due 
diligence for low value online payments with digital euro as a pan-euro-area payment 
instrument).  

  The  Eurosystem  should  have  the  capacity  to  reduce  the  risks  to  financial 
disintermediation and stability by  defining, applying and parametrising tools to limit 
the  digital  euro’s  store  of  value  function  based  on  the  criteria  set  out  in  the 
Regulation. The Eurosystem should implement such tools depending on the financial 
and monetary environment. 

  The digital euro should be first available for residents/businesses of the euro-area and 
visitors to the euro-area and at a later stage, subject to conditions aiming at mitigating 
financial stability risks in non-euro area countries, for the residents/businesses of non-
euro  area  Member  States  and  third  countries  when  transacting  with  euro-area 
residents/businesses (see Annex 9). The Regulation should allow the international use 
of the digital euro in the future subject to bilateral agreements/arrangements between 
the  Union  and  third  countries  and  to  bilateral  operational  arrangements  between  the 
ECB and the respective central banks or bilateral agreements between the Union and 
third countries with non-euro area countries. 

On that basis, in this section the overall impact of establishing a digital euro will be assessed. 

80 

 
 
 
 
7.2  Overall impact of preferred option 

Effectiveness 

Providing  a  digital  euro  and  its  necessary  regulatory  framework  would  ensure  the  euro  can 
support the EU’s economy in the digital age in line with the general objective.  

First, a digital  euro designed based on the preferred options on access and usability will be 
widely available for citizens and businesses in the EU. It would therefore ensure that central 
bank money remains usable in the EU’s digital economy and can serve as monetary anchor. 
Preserving  the  accessibility  and  usability  of  central  bank  money  in  the  digital  era  is  key  to 
protect  monetary  sovereignty210  and  the  well-tested  two-layer  monetary  system  based  on 
convertibility  of  regulated/supervised  forms  of  money  into  central  bank  money.  The  digital 
euro  would  thus  complement  cash  in  providing a  monetary  anchor  by  ensuring  that  private 
money can always be converted into safe public money that is usable in the digital economy. 
This  would support confidence in  money, the euro  and financial stability in  the digital  age. 
The legal  tender status  of the digital  euro would  significantly support these objectives.  The 
right  compensation  model  will  ensure  that  intermediaries  provide  quality  services,  while 
protecting  the  users  from  excessive  fees.  At  the  same  time,  this  new  form  of  central  bank 
money in digital form should be seen as a complement to rather than a replacement of euro 
cash. Therefore, it is vital that acceptance of and access to cash is safeguarded.  

Second,  a  digital  euro  could  offer  an  additional  payment  choice  for  people  and  increase 
financial inclusion. A digital central bank money would be designed along public objectives 
thus  catering  more  for  wide  accessibility,  universal  acceptance,  privacy  and  the  needs  of 
vulnerable people. For this purpose, a high level of privacy is required for cash-like proximity 
payments (offline use). When used online, the digital euro, which can be transferred without 
payer  and  payee  meeting  in  person,  carries  higher  AML  risks  than  cash  (which  is  more 
difficult  to  carry  in  large  quantity),  and  should  therefore  be  subject  to  the  same  level  of 
monitoring like other private electronic means of payment, while including the possibility for 
harmonised simplified due diligence for onboarding and online low value transactions. This 
differentiated  approach  would  also  be  effective  in  supporting  state-of-the-art  payment 
solutions, by allowing the sharing of user’s data for on-line transactions in compliance with 
GDPR and PSD2 requirements. 

Third,  the  digital  euro  could  help  the  further  development  and  the  resilience  of  the  EU’s 
payment system. A digital euro could create synergies with private payment initiatives, as it 
could  offer  a  better,  unified  and  shared  infrastructure  to  support  private  pan-European 
payment  solutions.  A  pan-euro  area,  and  European-governed  acceptance  mechanism  at  the 
POI  for  the  digital  euro  may  be  leveraged  also  for  the  acceptance  of  private  payment 
solutions across the euro area once the digital euro has become widely available and usable. 
In addition, a central bank run digital payment system could serve as a backup or additional 
facility  in  times  of  crisis,  natural  disaster,  war  or  when  private  payment  means  experience 
operational issues. This would strengthen the operational resilience of the EU’s economy. 

Fourth, a digital euro can enhance the development of innovative, industry 4.0 services in the 
EU, complementing private payment solutions.211  

210 Monetary sovereignty refers to the ability of public authorities to control the unit of account in their jurisdiction in order to manage the 
macroeconomy e.g. in the euro area, goods and services need to be priced in euro. 
211 See Annex 8 on the evolution of the internet and payment needs of industry 4.0. 

81 

 
 
                                                           
the  digital  euro  with  appropriate  safeguards  will  avoid  excessive  financial 
Fifth, 
disintermediation  and  risk  to  financial  stability.  Potential  limits  on  holdings  or  other 
disincentives for using it as store of value would be effective to achieve these objectives.  

Finally, the international role of the euro would be strengthened over time by a digital euro. 
Over time, it can serve as a means of payment not only within the euro-area and for visitors 
but also for residents and businesses of non-euro area Member States and even certain trade 
transactions with third country businesses subject to conditions aimed at mitigating financial 
stability risks in non-euro area Member States and third countries. 

Efficiency 

The  preferred  option  has  been  designed  to  effectively  achieve  the  general  and  specific 
objectives in the most cost efficient and proportionate way. Most of the implementation costs 
will  fall  upon  the  Eurosystem,  PSPs,  and  merchants.  People  are  not  expected  to  bear 
significant direct cost as basic use of the digital euro should be free of charge for them.212 

The Eurosystem would bear the costs of developing the back-end infrastructure as well as its 
running costs. Given the overall importance, especially of the settlement infrastructure, high 
costs are expected for the mitigation of cyber risks and to ensure operational continuity under 
all circumstances (e.g. also the ability to process peak volumes).  

Merchants are expected to invest in the acceptance infrastructure and the integration of digital 
euro payments with their own systems. As confirmed by the targeted consultation, merchants 
that  already  accept  digital  means  of  payment  will  face  lower  adjustment  costs  than  those 
which currently accept only cash. Standardisation of the acceptance infrastructure and the end 
user interface would help decrease the merchants’ compliance cost. These aspects will be for 
the Eurosystem to optimise. There is a risk that intermediaries set fees for merchants at such 
levels  that  can  safeguard  their  interchange  fee  revenues  for  alternative  means  of  payments 
(cards),  due  to  reverse  competition.  These  fees  on  merchants  would  be  passed  on  to 
consumers  ultimately.  To  avoid  overcharging  merchants,  the  ECB  will  be  mandated  by  the 
Regulation to develop recommendations on pricing expectations for intermediaries, and also 
empowered to constrain fees in case the recommendations prove insufficient, pending market 
analyses. 

PSPs  will  mainly  need  to  invest  in  the  end-user  interface  and  the  integration  with  the 
settlement systems of the Eurosystem. A key challenge for intermediaries will be to integrate 
the  digital  euro  into  their  existing  mobile  banking  applications.  They  will  also  bear  the 
ongoing cost of customer identification, fraud detection, AML/CFT compliance and general 
onboarding  costs.  These  costs  can  be  similar  to  existing  systems  and  processes  and 
onboarding cost of existing customers would likely be negligible. As the basic services of the 
digital euro will be free for customers, they may also face lower income from their existing 
payment services if customers prefer to pay in digital euro over commercial bank money. At 
the  same  time,  PSPs  may  receive  income  from  those  merchant  fees  and  since  merchants 
generally  accept  a  mix  of  payment  solutions,  this  should  not  lead  to  potential  loss  of  their 
revenues. They may also offer value-added services building on a digital euro for consumers 
to  generate  fee income.  The overall impact on PSPs’ profitability is  hard to  estimate  at  the 
current juncture, as it crucially depends on the potential loss in market share in the payments 
market  to  digital  euro  transactions,  the  digital  euro  remuneration  model,  as  well  as  on  the 

212 Nevertheless, if merchants are faced with high fees for the Digital Euro, these fees will ultimately be passed on to consumers through 
relatively higher retail prices. 

82 

 
 
                                                           
extent  to  which  PSPs  would  be  able  to  generate  fee  income  via  digital  euro-related  added 
value services (see Annex 11).  

On  the  other  hand,  the  compensation  model  for  a  digital  euro  in  particular  if  based  on 
interchange  fees,  might  lead  to  crowding  out  of  cheaper  payment  solutions,  which  would 
impact  the level  of competition  in  payment markets,  overall merchant  acceptance costs and 
ultimately lead to increased retail prices and lower consumers’ welfare. 

The proposal will not incur any significant additional administrative costs either, as PSPs and 
market infrastructure providers already have reporting obligations for payment transactions, 
which would also apply - with only limited adjustments - to digital euro transactions. 

Coherence 

The  initiative  would  be  fully  consistent  with  the  policy  objectives  of  other  Commission 
initiatives  laid  out  in  the  Commission’s  Digital  Finance  Strategy  and  Retail  Payments 
Strategy  for  the  EU  adopted  on  24  September  2020,  aimed  at  promoting  digital 
transformation of finance, payments and the EU economy and removing fragmentation in the 
Digital Single Market: 

EU-wide interoperable European Digital Identity Wallet (EUDIW)213. In that respect, it will 
be  essential  that  users  can  on-board  and  make  payments  with  the  digital  euro  by  using  the 
EUDIW for identification,  authentication and payment  initiation, on a voluntary basis.  This 
means that electronic identification as set out in the proposal amending Regulation (EU) No 
910/2014  introducing  a  framework  for  a  European  Digital  Identity  should  be  accepted  by 
intermediaries  for  the  verification  for  both  prospective  and  existing  customers  and,  where 
relevant, for the remote performance of customer due diligence. Where intermediaries offer 
payment  transactions  with  the  digital  euro,  they  should  also  accept  the  use  of  European 
Digital Identity Wallets.  

The  initiative  is  also  consistent  with  the  framework  governing  the  provision  of  payment 
services across the Union: 

  PSD2  regulates  the  licensing  requirements  for  the  provision  of  payment  services  by 
payment institutions and the rights and obligations that apply to payment service users 
and payment service providers (including credit institutions, e-money institutions and 
payment  institutions)  when  making  payment  transactions.  PSD2  will  fully  apply  to 
digital euro. Amending the definition of funds in PSD2 to clarify beyond doubt that it 
also  includes  the  digital  euro  will  ensure  that  this  legal  framework  also  applies  to 
digital euro transactions.  

  Data on digital euro payment accounts could, upon the request of the digital euro user, 
be  shared  in  line  with  the  PSD2  ‘open  banking’  framework.  This  means  that  PSPs 
could  process  personal  data  linked  to  digital  euro  transactions  to  promote  new 
financial  products  and  services  for  consumers  and  firms,  in  accordance  with  PSD2 
and the GDPR. 
In order to ensure coherence between the legal tender of the digital euro and the legal 
tender of cash, the legal tender of cash should also be regulated in a coordinated way 
with the legal tender of the digital euro. 
In  terms  of  financial  inclusion,  the  initiative  will  be  consistent  with  the  approach 
adopted  under  the  Payment  Accounts  Directive  which  aims  at  ensuring  a  universal 

 

 

213https://eur-lex.europa.eu/resource.html?uri=cellar:5d88943a-c458-11eb-a925-01aa75ed71a1.0001.02/DOC_1&format=PDF 

83 

 
 
                                                           
access  to  payment  accounts  with  basic  features  for  financially  excluded  consumers. 
The digital euro will be offered following a similar approach, ensuring access to basic 
digital euro payment services.  

  By promoting  a risk-based approach that underpins the Union AML framework and 
by  excluding  full  anonymity,  the  initiative  is  consistent  with  the  objectives  of  the 
AML  package  adopted  by  the  Commission  in  July  2021.  Digital  euro  transactions 
would be subject to the AML/CFT framework. For online transaction, intermediaries 
would  have  to  conduct  transaction  monitoring  as  for  other  electronic  means  of 
payment.  A  specific  transaction  monitoring  is  preferred  for  low-value  offline 
proximity payment  along the lines of the cash treatment  (i.e.  processing  of personal 
data  relating  to  identity  when  funding  and  defunding  the  offline  digital  euro  as 
opposed to transaction data). For both offline and online digital euro and consistently 
with  the  AML  framework,  intermediaries,  as  obliged  entities,  would  have  to  report 
suspicious  transactions.  The  new  AML/CFT  package  proposes  to  harmonise 
consumer due diligence, across the EU.  AMLA, the new EU AML Authority would 
be  tasked  with  developing  regulatory  technical  standards  including  simplified  due 
diligence  in  case  of  low  risk.  This  would  apply  to  the  digital  euro,  and  would  help 
ensure  consistent  on-boarding  conditions  across  the  euro-area.  Consistently  with 
FATF recommendations and the new AML package, specific holding and transaction 
limits  would  be  introduced  for  the  offline  digital  euro  after  a  risk  assessment,  by 
delegated  act.  In  addition,  the  level  of  transaction  monitoring  for  the  offline  digital 
euro would be subject to a review clause, based on a money laundering and terrorist 
financing risk assessment. 

  Whereas the store of value function of cash is not limited, the potential limitation of 
the digital euro’s store of value function would be consistent with the Commission’s 
and  the  ECB’s  respective  mandates  with  regard  to  ensuring  financial  stability  and 
maintaining efficient monetary transmission. 

Finally, the initiative is consistent with the Commission Communication “Towards a stronger 
international role of the euro”,214 in which the Commission supported a wider role of the euro 
to support trade, while being mindful of potential negative impacts on the financial stability 
of  non-euro  area  countries  (“spill-over  effects”)  in  line  with  the  G7  principles  on  retail 
CBDC, which calls for a staggered and cautious approach. A strong international use of the 
digital  euro  could  also  significantly  expand  the  Eurosystem’s  balance  sheet  and  affect  its 
monetary policy. 

Impacts on the existing market and market actors 

The  introduction  of  the  digital  euro  is  expected  to  have  an  impact  on  both  the  EU's  retail 
payment market and the market for savings instruments, particularly deposits. On top of the 
effects brought by the legal tender status, the extent of this impact will largely depend on the 
final features and design of the digital euro, which will be determined by both regulation and 
decisions  made  by  the  European  Central  Bank  (ECB).  In  addition,  the  reaction  and 
adjustment  of  market  players,  including  further  innovation,  will  be  another  factor  affecting 
the dynamics of the EU's payment market after the introduction of the digital euro. 

214 
december-2018_en. 

https://ec.europa.eu/info/publications/towards-stronger-international-role-euro-commission-contribution-european-council-13-14-

84 

 
 
 
                                                           
While the digital euro should be widely available, there is no quantifiable target market share 
that it should achieve in either the short or long term. Payments made with the digital  euro 
should strengthen the competitiveness and open strategic autonomy of the European payment 
market,  but  should  not  lead  to  the  displacement  of  any  efficient  private  payment  solutions, 
nor reduced investment and innovation in this sector. In this regard, trying to maintain level-
playing field with other private means of payment in the compensation model will be crucial. 

Regarding the EU's retail payment market, payment service providers (PSPs) will face a new 
competing payment product that may support or challenge their business. On one hand, the 
digital euro could reduce the market share of existing private electronic means of payments, 
resulting in lower revenues for certain PSPs. On the other hand, the provision of digital euro 
services would also mean new revenue for both distributing and acquiring PSPs. 

Depending on the overall costs, fee structure and the additional value-added services built on 
the digital euro, some PSPs may be net beneficiaries of the new market situation, while others 
may be worse off. Since the ECB may not charge a scheme and settlement fee after payment 
transactions  in  digital  euro,  both  PSPs  and  merchants  may  face  fewer  costs  than  when 
executing or accepting private means of payments. 

Furthermore,  the  technical  rules,  standards,  and  procedures  of  the  digital  euro  should  be 
developed  in  collaboration  with  market  participants.  Building  on  existing  standards  would 
save implementation and ongoing costs for PSPs and merchants. If PSPs can use standardized 
solutions  and  form  factors  (e.g.,  QR  codes,  NFC),  they  could  more  easily,  quickly,  and 
efficiently expand the geographical reach of their payment product. For example, a national 
instant payment-based payment solution could market its service at a pan-European level by 
adopting  the  standards  and  procedures  developed  for  the  digital  euro.  This  would  not  only 
benefit the business  of PSPs, but  also  users who  could  pay cross-border  with  their national 
payment solutions. 

Payment service providers, especially deposit taking credit institutions will also face the risk 
of  losing  funds  and  deposits.  People  may  convert  not  only  cash  but  also  deposits  or  funds 
held  on  payment  accounts  to  digital  euro.  According  to  an  ECB  occasional  paper,215 
illustrative  demand  scenarios  suggest  possible  deposit  outflows  ranging  from  EUR  180 
billion  to  EUR  6.3  trillion,  accounting  for  0.5%  to  18%  of  aggregate  euro  area  bank 
liabilities.  

As a result, non-credit institutions may lose any interest income they may gain and also any 
fee income that they may charge to clients in relation to these funds. Credit institutions losing 
deposits would see an impact on both their liquidity situations and likely on their net interest 
income. As explained in Section 6.2.3, in case of large-scale deposit reduction in favour of a 
digital euro, banks could face liquidity stress and increased funding costs (higher wholesale 
funding) that may translate to lower net interest income and also lower credit provision to the 
economy.  These  impacts  would  be  mitigated  by  tools  which  the  ECB  would  have  at  its 
disposal for such purposes as set out in that Section, in particular effective holding limits on 
the digital euro. 

The aforementioned impacts would affect individual banks differently, where banks that rely 
to a large extent on deposit funding and with smaller liquidity buffers would be expected to 
be impacted more strongly. Whether or not structural disintermediation risks would actually 
materialize,  depends  crucially  on  the  take-up  of  a  digital  euro  and  the  extent  to  which  a 

215 Adalid et al. (2022), “Central bank digital currency and bank intermediation”, ECB Occasional Paper Series 293, May 2022 

85 

 
 
                                                           
digital euro would substitute cash or deposits, both of which are difficult to forecast,  on the 
availability  and  effective  use  of  tools  for  the  ECB  to  limit  the  store  of  value  function  (see 
section 6.2.3)  and in any case may significantly vary with economic circumstances such as 
the interest rate environment and the availability of reserves at the central banks. 

Other environmental, social and fundamental rights impacts 

Environmental  impacts  are  difficult  to  estimate  at  this  stage  as  the  concrete  design  of  the 
digital euro is not yet finalised. Nevertheless, since the first issuance of the online digital euro 
would  use  similar  infrastructure  as  currently  available  payment  means,  the  energy 
consumption and thus environmental impact  is expected to be no different than for existing 
payments  (also  some  existing  payments  would  be  replaced  by  payments  in  digital  euros). 
Especially  in  the  long-term  it  is  expected  that  the  digital  euro  would  replace  some  current 
cash payments. The environmental footprint of bringing digital euros into circulation will be 
substantially  lower  than  bank  notes  and  coins  (printing/coinage,  transportation  etc.).  The 
energy  consumption  of  a  CBDC  has  been  deemed  comparable  to  that  of  a  credit  card 
system.216 In that respect, the ECB’s objective is that “the design of the digital euro should be 
based  on  technological  solutions  that  minimise  its  ecological  footprint  and  improve  that  of 
the current payments ecosystem”217. It should therefore support progress on UN SDG goals, 
in  particular  as  concerns  lowering  energy  consumption  and  CO2  emissions.  A  detailed 
assessment can only be done at implementation level. 

In  terms  of  social  impact,  the  digital  euro  would  improve  financial  inclusion  by  ensuring 
access  to  the  digital  euro  payment  services  to  unbanked  people  in  a  context  where  cash 
becomes  less  and  less  useable  in  a  digitalised  economy  and  the  use  of  private  means  of 
payments  entails  costs  and  requires  compliance  with  sometimes  burdensome  AML/CFT 
obligations.  

All  privacy  options  (options  2b-2e)  respect  the  fundamental  rights  to  private  life  and  the 
protection of personal data, enshrined in Article 7 and 8 of  the EU Charter of Fundamental 
Rights of the European Union. Any limitation on the protection of personal data and privacy 
must  apply  only  in  so  far  as  it  is  strictly  necessary,  in  accordance  with  Article  52  of  the 
Charter.  The  processing  of  personal  data  should  be  permitted,  while  fully  respecting 
fundamental rights, only for the tasks related to the distribution and use of the digital euro as 
laid down in the regulation establishing a digital euro. These processing activities will respect 
the principles of necessity and proportionality established in Union data protection law. The 
regulation establishing a digital euro will ensure full compliance with Union data protection 
law,  in  particular  Regulation  (EU)  2016/679  (GDPR)  and  Regulation  (EU)  2018/1715 
(EUDPR) will apply to distribution and use of a digital euro when personal data is processed.  

Cybersecurity 

Payments  with  digital  euro  will  face  cyber,  IT  and  other  operational  risks.  For  online 
payments  with  a  digital  euro,  there  will  be  additional  risks  compared  to  the  ones  faced  by 
existing  online  payment  systems  e.g.  SEPA  credit  transfers,  national  debit  card  payment 
systems and international debit and credit card schemes. Specifically, while end users will be 

216 “As the legitimacy of CBDC is backed by the trust of central banks, CBDC does not need to prove its legitimacy through its 
technological structure. Therefore, CBDC does not require the energy-intensive consensus or mining mechanisms used by a cryptocurrency, 
so its energy consumption is lower (comparable to that of a credit card system)” in “Environmental Implications of a Central Bank Digital 
Currency, World Bank Group, July 2022, S. Lee and J. Park 
217 ECB Report on a digital euro, October 2020. 

86 

 
 
                                                           
exposed  to  similar  levels  of  risk  associated  to  frauds  (e.g.,  through  phishing  and  account 
compromise),  the  Eurosystem  will  face  additional  threats  by  adversaries  not  necessarily  in 
search  for  a  direct  financial  gain218.  PSPs  have  already  systems  and  processes  in  place  to 
manage  current  risks  in  line  with  the  requirements  of  the  Payment  Services  Directive  (EU 
2015/2366,  or  Payment  Services  Directive  2).  For  online  payments  through  digital  wallets, 
the  European  Digital  Identity  Regulation  will  make  it  compulsory  to  obtain  cyber  security 
certification with at least security level “high” under the Cyber Security Act219. 

For the cyber resilience of the central settlement systems set up by the Eurosystem, the ECB 
has  extensive  experience  with  protecting  its  existing  payment  systems,  and  continuously 
evolves the reference security framework.220 Nevertheless, the continuous and instant nature 
of the settlement  service provided by the Eurosystem, combined with  the wide audience of 
served subjects, implies unprecedented challenges to ensure a systematic availability. 

The  PSPs  will  be  under  the  scope  of  the  Digital  Operational  Resilience  Act  (DORA).221 
DORA creates a regulatory framework on digital operational resilience whereby all firms in 
the  financial  sector  need  to  make  sure  they  can  withstand,  respond  to  and  recover  from  all 
types of ICT-related disruptions and threats. PSPs would also need to abide by DORA when 
they distribute the digital euro.  

While  the  ECB  and  the  Eurosystem  would  not  fall  under  the  scope  of  DORA,  the 
Eurosystem, is however expected to be subject to the new Cybersecurity Regulation proposed 
in March 2022 by the Commission,222 which aims to establish a framework for governance, 
risk  management  and  control  in  the  cybersecurity  area  across  the  European  Union 
institutions,  bodies,  offices  and  agencies.  They  must  set  up  a  specific  framework  for 
governance, risk management and control in the area of cybersecurity, implement a baseline 
of  cybersecurity  measures  addressing  the  identified  risks  and  conduct  regular  maturity 
assessments and share incident-related information with CERT-EU without undue delay thus 
boosting  cybersecurity  capabilities,  and  stimulating  regular  maturity  assessments  and  better 
cyber-hygiene.  

Finally, the Regulation on the digital euro cannot regulate existing supervisory powers of the 
ECB over payment system, hence this is not part of the impact assessment either.  

The  offline  use  of  the  digital  euro  can  pose  additional  challenges  in  terms  of  operational, 
cyber  and  fraud  risks.  For  offline  payments  in  physical  proximity,  digital  euros  would  be 
stored on the safe device of  a mobile device such as on smartphones or  smart watches.  By 
losing the device, or the device being stolen, all funds would be lost as well, like lost wallets 
containing  banknotes  and  coins.  The  devices  and  software  used  to  store  digital  euro  and 
authenticate payment transactions locally are exposed to high risk of compromise, or damage. 

218 E.g. politically motivated / state sponsored adversaries trying to destabilise the Euro Area financial system. 
219 Regulation (EU) 2019/881 of the European Parliament and of the Council of 17 April 2019 on ENISA (the European Union Agency for 
Cybersecurity) and on information and communications technology cybersecurity certification and repealing Regulation (EU) No 526/2013 
(Cybersecurity Act). http://data.europa.eu/eli/reg/2019/881/oj 
220 The Eurosystem is currently finalizing a consolidated “TARGET Services Cyber Resilience and Information Security Framework” 
221 Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on digital operational resilience for the 
financial sector and amending Regulations (EC) No 1060/2009, (EU) No 648/2012, (EU) No 600/2014 and (EU) No 909/2014   
EUR-Lex - 52020PC0595 - EN - EUR-Lex (europa.eu) 
222 Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL laying down measures for a high 
common level of cybersecurity at the institutions, bodies, offices and agencies of the Union. 
https://commission.europa.eu/publications/proposal-cybersecurity-regulation_en 

87 

 
 
                                                           
The Eurosystem need to ensure that these hardware and software solutions are secure and can 
withstand  tempering.  The  main  risk  here  is  double  spending  i.e.  transferring  digital  euro 
while keeping the same amount on the device. This would create additional digital euros for 
the fraudsters, which would impact the Eurosystem balance sheet.  

The  safety  of  a  mobile  device  used  for  initiating  digital  euro  payments,  be  it  for  online  or 
offline  transactions,  will  be  key.  In  this  respect,  the  future  cyber  certification  of  mobile 
devices under the Cyber Resilience Act223 proposed by the Commission in September 2022 
can  help  address  these  risks,  as  for  other  means  of  payment.  The  Act  seeks  to  establish 
common cybersecurity rules for digital products and associated services that are placed on the 
EU market. The framework will ensure that manufacturers improve the security of products 
with digital elements since the design and development phase and throughout the whole life 
cycle.  The  Act  will  ensure  a  coherent  cybersecurity  framework,  facilitating  compliance  for 
hardware and software producers, enhance the transparency of security properties of products 
with  digital  elements,  and  enable  businesses  and  consumers  to  use  products  with  digital 
elements securely. 

7.3 

Impact on small and medium sized enterprises  

The  initiative  is  expected  to  give  rise  to  more  competition  in  the  market  for  payments. 
Merchants  throughout  Europe,  including  many  SMEs,  would  benefit  from  this  in  terms  of 
lower costs and increased innovation.  While there will be marginal one-off costs in the on-
boarding  of  the  digital  euro  (see  Annex  13),  the  long-term  benefits  in  terms  of  lower  fees 
arising  from  increased  competition  in  the  EU  payment  market  would  outweigh  them  over 
time.   

Depending  on  the  setup  and  the  possible  provision  of  free  P2P  and  P2B  mobile  payment 
applications  it  could  help  micro  enterprises  to  offer  digital  payments  next  to  cash,  thereby 
facilitating  a  transition  to  the  digital  age.  Options  which  would  avoid  the  need  for  new 
physical infrastructure (e.g. payment terminals) appear feasible and should be assessed by the 
ECB.  This  approach  would  minimise  costs  impacts  on  merchants,  including  SMEs,  and 
facilitate  larger  benefits  in  terms  of  financial  inclusion  (also  for  micro-enterprises).  If  this 
should not be possible for technological or stability reasons, it would merit more far-reaching 
exemptions from the obligation to accept digital euro for certain categories of merchants.  

7.4 

REFIT (simplification and improved efficiency) 

The present initiative is not a REFIT initiative. It concerns a new form of central bank money 
available to the general public, alongside the euro banknotes and coins that shall be created 
and  regulated  in  its  essential  aspects  by  a  new  EU  Regulation  based  on  Article  133  of  the 
TFEU. Hence, it is not based on an evaluation of any existing Regulation. 

7.5 

 “One In One Out” 

The digital euro initiative will be largely neutral from a one-in one-out perspective. There is 
currently no framework for a digital euro in place, hence there are no existing administrative 
costs that could be saved in this area.  

223 Commission proposal for a regulation of the European Parliament and of the Council on horizontal cyber security requirements for 
products with digital elements and amending regulation (EU) 2019/1020,  COM(2022) 454 final, SEC(2022) 321 final of 15.9.2022.  

88 

 
 
                                                           
While  the  initiative  will  involve  adjustment  costs,  which  would  be  kept  to  a  minimum  and 
largely  compensated by  benefits,  it does not impose any new and significant  administrative 
costs, i.e. specific labelling, reporting or registration  requirements, which would need to  be 
offset  by  cost  savings  elsewhere.  Payment  reporting  to  the  Eurosystem  is  mostly  done  by 
market  infrastructures.  PSPs  have  very  limited  requirements  on  payment  reporting,  which 
will  likely  be  the  same  for  a  digital  euro,  especially  if  the  Eurosystem  obtains  aggregated 
information  through settling payments.  Payment  service providers (PSPs) may need  to  bear 
the  cost  of  customer  onboarding  and  transaction  verifications,  including  AML/CFT  checks. 
These are substantive requirements that however will be offset by the fact that already today 
the payment transactions  that the digital  euro would  replace in  the  future are subject  to  the 
same verifications, and that digital euro users already need to be onboarded by PSPs as part 
of  existing  customer  onboarding  obligations  (i.e.  opening  a  bank  account).  Any  reporting 
related to the compliance with such requirements may be considered administrative costs, but 
any  such  costs  may  not  be  higher  than  costs  already  incurred  by  PSPs  under  existing 
AML/CFT obligations. 

8  HOW WILL ACTUAL IMPACTS BE MONITORED AND EVALUATED?  

The objective of ensuring that the central bank issued money, the euro can support the EU by 
meeting the payment needs in the digital age can already be achieved when the digital euro is 
issued  for  the  first  time.  Designing  the  digital  euro  along  the  preferred  options  would  also 
ensure that central  bank  money  remains  present,  available  and accepted  and that the  euro’s 
competitiveness is increased. While the aim of the initiative is that the digital euro is widely 
accessible and accepted for retail payments, there is no specific thresholds that can be set as a 
minimum  benchmark  for  its  success.  Eventually,  the  digital  euro  should  be  available  as  an 
additional  choice  for  people  and  businesses  in  addition  to  cash,  private  money  and  private 
payment  means.  Therefore,  the  success  of  the  initiative  means  take-up  by  users  without 
strong  negative  impact  on  private  solutions,  hence  it  will  be  monitored  in  this  broader 
context. 

The  achievement  of  these  objectives  can  be  monitored  on  an  ongoing  basis  based  on  data 
from the PSPs, merchants and the ECB. The total number and volume of retail payments in 
digital euro and their relative share as compared to other payment means  could be the main 
indicators in monitoring the use of digital euro in the digitalized economy of the EU.  

Regarding the specific objectives, the following monitoring indicators could be used: 

Objective 1 

  For  ensuring  that  central  bank  money  remains  present,  available  and  accepted  by 
everyone, the number, the volume and share of retail payments in central bank money 
(i.e.  cash  and  digital  euro),  the  number  of  merchants  accepting  and  the  number  of 
PSPs providing digital euro services could be monitored. To see whether users pay in 
digital euro regularly, the payment habits on a weekly or monthly basis could be also 
surveyed. To assess the impact on merchants, the fees charged by PSPs to merchants 
and other PSPs could also be surveyed regularly. 

  For the state of the art payments, machine to machine payments and the use of DLT 

or similar technology in digital euro could be measured.  

89 

 
 
  For  pan-European  payments,  cross  border  retail  payments  in  digital  euro  within  the 
euro  area  could  be  monitored  (number  and  value,  also  as  share  of  all  retail  cross 
border payments). 

Objective 2 

  For measuring the competitiveness of the euro vis-à-vis third country issued CBDCs 
and  stablecoins,  retail  payments  in  these  payment  means  could  be  monitored  within 
the euro area and beyond. To measure the international role of the digital euro, trade 
payments with third countries in digital euro could be monitored. 

In all cases the ECB would have statistics on retail payments in digital euro. The information 
on the digital euro payments would come primarily from the Eurosystem’s own IT systems 
and  PSPs.  The  ECB  conducts  regular  payment  surveys  where  other  payment  methods 
including  cash  is  monitored.  Regular  ECB  surveys  would  have  to  collect  data  on  fees. 
Eurostat  would  have  information  on  trade  with  third  countries.  The  exact  reporting  and 
timing should be developed by the Eurosystem. 

Table 7. Monitoring of the digital euro 

Objectives 

Indicator 

General objective 
Ensure that the central bank 
money issued by the ECB 
can support the EU’s 
economy in the digital age, 
while safeguarding the role 
of cash  

Specific-objectives 

Reinforce the euro’s 
monetary anchor in the 
digital age by ensuring that 
central bank money in both 
its physical and future 
digital form is widely 
available to and accepted by 
all euro-area 
residents/businesses and 
tailored to their needs, while 
preserving financial 
stability.  

Strengthen the EU’s open 
strategic autonomy by 
increasing the euro’s 
competitiveness vis-à-vis 
other currencies, third 
country CBDCs and 
stablecoins not denominated 
in euro. 

Amount of digital euro and cash in circulation 
Number and volume of digital euro transactions  and 
their  share  of  all  electronic  transactions  in  the  euro 
area 
Number  and  volume  of  cash  transactions  and  their 
share of all transactions in the euro area 

Retail  payment  transactions  in  central  bank  money 
i.e. cash and digital euro in the euro area (P2P, P2B, 
P2G) versus in commercial bank money 
Weekly,  monthly  use  of  digital  euro  by  people  and 
businesses 
Level of fees charged by acquirer PSPs to merchants 
and level of inter-PSP fees paid to distributing PSPs 
Machine-to-machine  payments  with  the  digital  euro 
in the euro area 
Cross  border  payments  with  the  digital  euro  in  the 
euro area (number and value, and also as share of all 
cross border electronic payments) 
Number of people with online and offline digital euro 
Number of merchants accepting digital euro 
Number  of  PSPs  distributing  the  digital  euro  and 
providing acquiring services 

Pan-European retail payments in digital euro outside 
the euro area 
Retail payments in third countries-issued CBDC and 
non euro denominated stablecoins in the euro area 
Payments  for  trade  (goods  and  services)  in  digital 
euro with third countries 

90 

Source of 
information 

ECB, PSPs, 
Merchants 

ECB, PSPs, 
Merchants 

ECB, PSPs, 
Merchants, national 
central banks, 
Eurostat 

 
 
 
 
 
 
 
 
The Regulation would be reviewed 3 years from the date of application and every three years 
thereafter.  The  Commission  would  present  a  report  to  the  European  Parliament  and  to  the 
Council on the application of the Regulation.  

By 6 months from the date of application of the Regulation, the Commission would present a 
report  to  the  European  Parliament  and  to  the  Council  on  the  developments  of  retail  central 
bank digital  currencies in  Member States whose  currency is  not  the euro  and the impact  of 
this  Regulation  on  the  internal  market,  accompanied  where  appropriate  by  proposals  for 
amending legislative acts governing the use of retail central bank digital currencies across the 
Union. 

By 3 years from the first issuance of the digital euro, the Commission would present a report 
to the European Parliament and to the Council on whether there is a sufficient and effective 
access to the digital euro in the euro area. 

91 

 
 
 
Annex 1 - Procedural information 

LEAD DG, DECIDE PLANNING/CWP REFERENCES  

This  Impact Assessment Report was prepared by Directorate B "Horizontal Policies" of the 
Directorate-General  for  Financial  Stability,  Financial  Services  and  Capital  Markets  Union 
(DG  FISMA)  and  Directorates  A  and  C  of  the  Directorate  General  for  Economic  and 
Financial Affairs (DG ECFIN), in cooperation with Directorate F of Directorate General for 
Communications Networks, Content and technology (DG CNECT).  

The Decide Planning reference is: 

  PLAN/ 2021/13199 

The  initiative  on  the  digital  euro  was  included  in  the  2023  Commission  Work  Programme 
published on 18 October 2022. 

ORGANISATION AND TIMING 

Three Inter-Service Steering Group (ISSG) meetings were held, chaired by SG, on 25 March 
2022, 17 June 2022, 5 October 2022 and a written procedure in January 2023 to discuss the 
draft  impact  assessment.  The  fourth  ISSG  meeting  on  27  April  2023  discussed  the  draft 
legislative text. The ISSG consisted of representatives from various Directorates-General of 
the Commission: COMP, JUST, CNECT, ECFIN, GROW, TAXUD, TRADE, and SJ.  

The contributions of the members of the Steering Group have been taken into account in the 
content and shape of this impact assessment. 

CONSULTATION OF THE RSB 

The Impact Assessment report was examined by the Regulatory Scrutiny Board (RSB) on 16 
November  2022.  The  RSB  gave  a  negative  opinion  on  18  November  2022.  The  IA  Report 
was resubmitted to the RSB on 23 March 2023. The RSB gave a positive opinion on 25 April 
2023. 

The  principal  areas  in  which  this  Impact  Assessment  was  reinforced  following  the  RSB 
negative opinion of 18 November 2022 are the following: 

RSB comments 
(1)  The  report  should  more  clearly  identify  and 
substantiate  with  evidence  the  specific  problems 
it  aims  to  tackle.  It  should  better  discuss  how 
likely  it  is  that  stable  coins  and  third  country 
CBDCs  will  challenge  ECB  monetary  policy.  It 
should  better  assess  in  the  main  report  why 
private  (digital)  payment  alternatives  are  not 
sufficient  in  meeting  the  needs  of  industry  4.0, 
web 3 and other digital applications and use cases 
as  well  as  how  this  may  critically  affect  the 
competitiveness  of  EU  industry  and  the  euro.  It 
should also clarify to what extent the legal tender 
character  of  money  is  essential  in  the  payment 
decisions  of  both  business  and  consumers 

How they were addressed 
In  the  baseline  scenario,  it  is  explained  more 
clearly that private solutions lack interoperability, 
fungibility and reliability to support the tokenised 
economy  of  industry  4.0  and  web  3  absent  a 
public  alternative.  Leaving  the  development  of 
payment  solutions  entirely  to  the  private  sector, 
without a digital euro as monetary anchor, would 
carry the risk of a fragmented outcome across the 
euro area. 
While  private  alternatives  (e.g.  private  tokens, 
instant  payments)  address  some  of  the  needs  of 
the  digital  economy  and  society,  only  a  central 
bank  digital  currency  can  provide  a  monetary 
anchor  for  private  digital  money,  guarantee 

92 

 
 
 
(including  by  the  vulnerable  and  financially 
excluded  users).  It  should  better  substantiate  to 
what  degree  alternative  measures  to  the  digital 
euro (both in the financial services regulatory as 
well  as  in  the  monetary  policy  areas)  can  tackle 
the problems. 

(2)  The  report  should  better  explain  the  link  to 
and  the  expected  impacts  of  the  parallel  legal 
tender  of  cash  initiative  and  other  baseline 
measures, such as the ECB 2030 cash strategy, in 
ensuring  adequate  presence  and  availability  of 
central  bank  money.  On  this  basis,  the  report 
should  better  outline  how  the  scale  of  the 
problems will evolve under the dynamic baseline 
the 
scenario 
establishment of the digital euro a necessity with 
a  view  to  provide  the  ECB  all  the  tools  it  may 
need to effectively address emerging challenges. 

and  whether 

this  makes 

(3)  The 
specific  objectives  are  currently 
formulated  in  rather  general  terms,  some  appear 
only  in  the  description  or  assessment  of  options 
without  being  clear  on  their  interaction  and 
relative  importance.  The  report  should  present  a 
sharper  set  of  specific  objectives  linking  them 
clearly  to  the  revised  specific  problems  with  a 
view to present a clear and consistent intervention 
logic  and  rationale  for  action.  In  this  context,  it 
should  clarify  to  what  extent  strategic  autonomy 
considerations  may  motivate  this  intervention. 
Given  the  enabling  and  preparatory  character  of 
the  initiative  the  report  should  also  clarify 
whether there is a need to reflect a broader set of 
specific  objectives  to  provide  the  ECB  with  the 
necessary  flexibility  allowing  balanced  measures 
to  emerging  challenges  and  making  a  potential 
digital euro sufficiently future proof. 
(4)  The  report  does  not  clearly  outline  how,  by 

financial  stability,  avoid  market  fragmentation 
and safeguard European monetary sovereignty. 
The monetary policy instruments of the ECB can 
address some of the problems and objectives but 
lacking a digital euro, a possible wide acceptance 
of  a  means  of  payment  or  store  of  value  not 
denominated  in  euro  in  the  future  could  weaken 
or  even  impair  the  transmission  of  monetary 
policy in the euro area. The Regulation on crypto 
assets,  MICA  will  reduce  risks  related  to  global 
stablecoins,  but  is  not  aimed  at  addressing  the 
problem set out in this impact assessment. 
The  specific  aspects  of  the  legal  tender  of  cash 
initiative, and in particular on access to cash, are 
better  explained  in  the  corresponding  boxes  and 
annex,  including  further  details  on  the  problems 
to  be  addressed,  legal  basis  and  subsidiarity, 
policy  options  and  their  impacts  (in  particular 
clarifying  the  discretion  left  to  Member  States 
regarding access to cash). 
he  link  between the initiative  on  the digital euro 
and  the  one  on  the  legal  tender  of  cash  is 
strengthened  in  the  general  objective  and  in  the 
first  specific  objective.  This  link  is  clarified 
in 
throughout 
particular  in  the  boxes  dedicated  to  the  cash 
initiative. 
It is explained more explicitly that the Regulation 
is  ‘enabling’  in  nature  i.e.  it  provides  the 
possibility, but not an obligation, for the ECB to 
issue 
the 
the  digital  euro.  Depending  on 
developments and risks described in the problem 
definition, the ECB can decide to issue the digital 
euro in line with its mandate. 

impact  assessment,  and 

the 

As  regards  the  first  specific  objective,  it  is 
explained that privacy is a fundamental right also 
in  payments,  which  will  be  critical  also  for  the 
wide use of a digital euro. Reference to financial 
stability in this objective was also added. 
In the second specific objective, a reference to the 
EU’s  open  strategic  autonomy  was  added  and 
more  explicitly  explained  in  the  corresponding 
second problem driver. 
It is explained how the trade-offs (including level 
playing 
stability, 
international use) link with the policy options and 
specific objectives. 

field,  privacy, 

financial 

It  is  clarified that  the  definition  and  use  of  tools 

93 

 
 
 
 
whom and at what stage the measures on limits to 
the digital euros store of value, offline low value 
payments and exceptions to mandatory payments 
will  be  determined.  It  should  be  clear  on  the 
objectives  and  criteria  for  their  operational  use 
and  better  highlight  the  significance  of  these 
option elements with regards to the effectiveness, 
efficiency and coherence of the intervention. I 
(5)  The  report  should  better  present  the  options 
regarding regulating the merchant fees, including 
by  being  more  specific  on  the  objectives  and 
criteria  that  should  frame  the  selection  and 
specification  of  the  preferred  option.  It  should 
more  thoroughly  assess  the  impacts  and  present 
clearly  the  pros  and  cons  of  the  considered 
options (including on governance). It should pay 
the 
particular  attention  on 
functioning  and  (price)  competition  of  (digital) 
payment  services  markets.  In  view  of 
the 
envisaged  free  basic  digital  euro  services,  the 
report should clarify how this will be reflected in 
the merchant fee design or broader remuneration 
package. 
(6) In more general terms the report should better 
describe how the digital euro is 12 expected to fit 
into in a competitive existing market and explain 
how  the  existing  market  actors  are  likely  to  be 
affected  by  the  initiative.  .  It  should  clarify  to 
what  extent  the  digital  euro  will  challenge  cash 
and  private  payment  alternatives  and  how  a 
proper  balance  between  public  and  commercial 
money will be ensured. The report should also, in 
more  detail,  explain  the  impact  on  smaller 
payment  service  providers  and  merchants,  in 
particular  merchants  not  currently  providing 
electronic payment services 

impacts  on 

the 

(7) The report should in more detail outline what 
the  cyber  risks  are  when  introducing  a  digital 
euro,  how  significant  the  cyber  risks  are  for 
CBDCs  in  comparison  to  the  alternative  digital 
payment  means,  and  what  mitigating  measures 
should  be  taken  to  ensure  that  the  security 
expectations of business and consumers are met. 
It  should  explain  how  the  balance  between 
privacy  and  security  will  be  addressed  and  how 
consistency with existing policies on anti-money 
laundering  and  on  combatting  terrorist  financing 
will be ensured. 
(8)  The  impact  assessment  should  better  present 
views (including divergent views) throughout the 
report of different stakeholder groups. 

to limit the digital euro’s store of value function 
for financial stability reasons will be in the hands 
of  the  Eurosystem,  as  issuing  entity  and  in  the 
context of its role in preserving financial stability. 
The  IA  now  includes  a  description  of  trade-offs 
to  be  taken into  consideration  by  the  ECB  when 
making this decision. 

As regards the compensation model including the 
regulation  of  merchant  fees,  policy  options  have 
been  developed,  presented  and  analysed.  It  is 
clarified  that  the  Regulation  would  mandate  the 
to  publish  price  expectations  and/or 
ECB 
guidelines,  based  on  the  principles  that  fees 
should follow.  

It  is  better  described  how  the  digital  euro  is 
expected to fit into a competitive existing market. 
In this context it was clarified that the digital euro 
would  co-exist,  complement  and  to  some  extent 
compete  with  private  payment  solutions  on  the 
EU’s payment market. Private payment solutions 
include  domestic  and 
international  payment 
cards,  instant  payments,  and  any  other  payment 
solutions  that  build  on  them  e.g.  digital  wallets. 
They  provide  substantial  benefit  for  both  people 
and  businesses  by  offering  a  fast,  reliable  and 
in  both  physical  (shops, 
efficient  payment 
restaurants,  etc.)  and  online 
(e-commerce) 
environment.  
It  is  clarified  that  the  cyber,  IT  and  other 
operational  risks  of  the  digital  euro  payment 
important.  The 
system  are 
consistency  with  other  Commission  initiatives 
(DORA,  Cybersecurity  Act,  Cybersecurity 
Regulation,  Cyber  Resilience  Act)  were  also 
explained in this regard. 
Consistency  with  the  AML/CFT  framework  is 
better explained. 

relevant  and 

Additional  information  on  the  results  of  the 
targeted  consultation  was  provided  in  the  report 
and in Annex 2. 

(9)  The  report  should  clearly  present 

the  Monitoring and evaluation arrangement has been 

94 

 
 
 
 
 
 
It 
monitoring  and  evaluation  arrangements. 
should present in more detail how the success of 
the initiative will be measured. 

supplemented with relevant indicators that would 
show the evolution of the use of digital euro. 
It was clarified that while the aim of the initiative 
is  that  the  digital  euro  is  widely  accessible  and 
accepted for retail payments, there is no specific 
thresholds 
that  can  be  set  as  a  minimum 
benchmark for its success. Eventually, the digital 
euro  should  be  available  as  an  additional  choice 
for  people  and  businesses  in  addition  to  cash, 
private money and private payment means. 

Following  the  positive  opinion  of  25  April  2023,  in  light  of  the  comments  attached  to  the 
opinion, further clarifications were introduced in the report: 

RSB comments 

(C) What to improve  
(1)  The 
report  should  better 
explain  the  identification  and  role 
of  intermediaries  and  how  the 
rules,  standards  and 
technical 
procedures  will  be  developed 
together with market participants.  

(2)  While  the  report  clarifies  the 
complexity of precisely estimating 
the  aggregate  recurrent  fee  costs 
for  merchants,  it  also  states  that 
the  costs  are  not  expected  to  be 
higher  than  the  costs  of  current 
payments  means.  Based 
on 
examples  on  current  payment 
means,  the  report  should  discuss 
the 
and  provide  examples  of 
current  costs 
to  give  a  more 
precise  indication  of  the  likely 

How they were addressed 

In Section 5 it was clarified that the main categories of PSPs that 
would  be  best  suited  to  distribute  the  digital  euro  are  credit 
institutions,  payment 
institutions  and  electronic  money 
institutions.  Acquiring  services  to  merchants  would  likely 
provided by the same PSPs that currently offer such services in 
relation to private payments e.g. card payments. 

It  was  also  inserted  that  in  January  2023,  the  ECB  set  up  a 
Rulebook  Development  Group  (RDG).  The  RDG  consist  of  a 
maximum  of  24  members  and  composed  by  10  representatives 
from  the  public  and  14  representatives  from  the  private  sector. 
The  private  sector  representatives  come  from  consumer 
organisations,  corporate  treasurers,  small  and  medium  sized 
business,  retailers  with  a  physical  presence,  online  retailers, 
acquirers,  the  European  Payment  Council,  credit  institutions, 
payment institutions.  

It was further explained in Section 7 that to minimize the impact 
on  already  available  payment  methods,  the  technical  rules, 
standards,  and  procedures  of  the  digital  euro  should  be 
developed in collaboration with market participants. Building on 
existing standards would save implementation and ongoing costs 
for  PSPs.  If  PSPs  can  use  standardized  solutions  and  form 
factors (e.g., QR codes, NFC), they could more easily, quickly, 
and  efficiently  expand  the geographical  reach  of  their  payment 
product. 
In  Section  6.2.1,  it  was  added  that  merchants  pay  merchant 
service charges (MSC) related to card payments. MSC has three 
major  components:  interchange  fees,  scheme  fees  (including 
processing fees) and acquirers’ margins. According to a study by 
CMSPI & ZEPHYRE, the MSC in EU 28 was on average about 
0.48%  in  2020.  The  interchange  fees  related  to  intra-EU 
consumer  credit  and  debit  card  payments  are  capped  by  the 
Interchange Fee Regulation (IFR) at 0.3% and 0.2% of the value 
of  the  POI  payment  transactions,  respectively.  This  can  vary 
among  Member  States  and  be  much  lower  than  the  cap. 
According to the study, the average interchange fee was 0.2% in 
2020.  Acquirers’  margins  depend  on  the  services  provided  and 

95 

 
 
 
 
 
 
magnitude  of 
provider.  

the 

cost  per 

to  be 

impact 

(3) Regarding the ECB mandate to 
issue 
pricing 
on 
expectations/guidelines 
merchant  fees,  the  report  should 
provide  more  details  on 
the 
foreseen 
assessment 
process,  including  by  clarifying 
how  competition  authorities  and 
stakeholders  will  be  involved.  It 
should  also  elaborate  on 
the 
criteria and foreseen process of the 
enabling  regulation  that  could  be 
triggered  in  case  the  guidance 
proves 
insufficient  and 
clarify who will be empowered.  
(4)  The  existing  market  and 
market  actors  are explained  in the 
problem  section,  but  the  report 
should  explain  how  the  preferred 
option  is  expected  to  fit  into  in  a 
competitive 
existing  market. 
Taking  the  combination  of  the 
preferred  options  into  account  the 
report  should  better  discuss  what 
the expected usage and uptake will 
be,  both  from  a  short-term  and 
long-term  perspective.  It  should 
also  clarify  how  coherence  of  any 
digital  euro  store  of  value  limits 
with  the  situation  as  regards  euro 
cash will be ensured.  
(5)  While 
to  cash 
options as such would not directly 
impose costs on banks or retailers, 
the  report  should  still  exemplify 
the 
cost  of 
potential EU measures such as re-
introducing ATMs.  

significance  of 

the  access 

report  should  better 
(6)  The 
evaluation 
describe 
the 
arrangements  of 
initiative, 
clarifying  at  what  point  a  future 
evaluation  would  be  carried  out 
once the digital euro is introduced. 
The  proposed  monitoring  should 

the 

the  negotiating  position  of  merchants.  According  to  the  study, 
the  average  acquirer  margin  was  0.18%  in  2020.  Lower  scale 
and weaker bargaining power nonetheless often result in higher 
acquirers’  margins  and  hence  higher  MSCs  for  smaller 
merchants.  Scheme  fees  on  average  were  0.09%  in  Europe 
according to the study. 
In  section  6.2.1,  it  was  clarified  that  when  designing  the  price 
expectations,  the  ECB  should  carry  out  an  impact  assessment. 
Relevant authorities such as national competition authorities and 
the  European  Commission  as  well  as  relevant  private  sector 
stakeholders may need to be consulted before the issuance of the 
price  expectation  and  the  impact  assessment.  The  Regulation 
could  also  include  a  review  clause  that  would  foresee  further 
mandate for the ECB to regulate fees if the guidance proves to 
be  insufficient.  Mandatory  capping  the  fees  may  prove  to  be 
necessary  if  the  fees  charged  to  merchants  (either  inter-PSP  or 
acquirer’s  margin)  prove  to  be  excessive  and  may  lead  to 
overcharging merchants when they mandatorily accept payments 
in  legal  tender.  The  ECB  should  continuously  monitor  the 
market  of  digital  euro  payments  and  the  evolution  of  fees 
charged. 
In Section 7, it was clarified that the introduction of the digital 
euro  is  expected  to  have  an  impact  on  both  the  EU's  retail 
payment  market  and  the  market  for  savings  instruments, 
particularly  deposits.  Depending  on  design  of  the  digital  euro 
especially the overall fee structure and remuneration, some PSPs 
may  be  net  beneficiaries  of  the  new  market  situation,  while 
others may be worse off. 
While  the  digital  euro  should  be  widely  available,  there  is  no 
quantifiable target  market  share  that it should  achieve  in  either 
the short or long term. 

In dedicated box F on the impact of measures on access to cash, 
the  example  of  a  Belgian  agreement  between  the  Ministry  of 
Finance  and  the  banking  industry  on  ATM  infrastructure  was 
used.  Although  this  agreement  represents  an  increase  of 
approximately 5% in the planned number of pooled ATMs, this 
should be seen in the context of the overall reduction of banks’ 
costs  over  many  years  through  branch  and  ATM  closures  and 
the likely cost savings for individual banks through the pooling 
of  ATMs  (costs  and  savings  are  not  disclosed  by 
the 
participating banks because this information is confidential). 
In  Section  8,  it  was  clarified  that  the  Regulation  would  be 
reviewed  3  years  from  the  date  of  application  and  every  three 
years thereafter. The Commission would present a report to the 
European Parliament and to the Council on the application of the 
Regulation.  
Indicators that can monitor fees have been added. 

96 

 
 
 
also  account  for  how  the  newly 
added  options  on  merchant  and 
inter-PSP fees will be monitored.  

EVIDENCE, SOURCES AND QUALITY 

A  number  of  inputs  and  sources  of  data  were  used  in  the  preparation  of  this  impact 
assessment, including the following: 

  Evidence  supplied  in  the  context  of  the  various  consultations  by  the  ECB  and  the 

Commission described in Annex 2. 

  Focus group analyses conducted by the ECB in 2021 and 2022.  
  ECB working papers and staff working documents 
  Commission and Joint Research Center (JRC) simulations and research (see in Annex 

11) 

With regard to quality of evidence, the following observations can be made: 

  The  public  and  targeted  consultations  by  the  ECB  and  the  Commission  are  not 
representative  of the whole EU population  and  businesses due to  their methodology 
(no sampling). 

 

 

Information  received  in  the  targeted  consultation  on  costs  for  PSPs  and  merchants 
came  from  a  few  respondents  and  could  not  be  independently  verified.  Many  PSPs 
and merchants declined to provide cost information. 

 The various simulations carried out by the JRC are in line with academic standards. 
Given  that  advanced  economies  have  no  experience  with  CBDCs,  there  is  no  data 
basis for purely empirical analyses. The simulations therefore are based on a number 
of assumptions and the scenario analyses are subject to uncertainty associated with the 
respective  assumptions  made,  in  particular  as  regards  the  CBDC  demand  (which  is 
also a function of CBDC design), demand distribution and substitution with cash and 
deposits.  The  macroeconomic  analyses  do  not  consider  the  possible  negative 
consequences  of  inaction  e.g.  in  the  presence  of  emerging  alternative  means  of 
electronic  payments,  and  do  not  explicitly  evaluate  possible  efficiency  gains  for  the 
economy  from  introduction  of  a  CBDC.  The  bank  profitability  analysis  should  be 
considered  as  a  static  assessment  of  the  effects  of  a  CBDC  induced  reduction  in 
deposits as it does not provide a modelling of banks’ possible reaction function.  

97 

 
 
 
 
 
Annex 2 - Stakeholder consultations  

I. 

Results of the ECB’s public consultation on the digital euro224 

The ECB public consultation on a digital euro  

On  2  October  2020  the  Eurosystem  published  its  “Report  on  a  digital  euro”.  The  report 
formed the basis for seeking wider views on the benefits and challenges of issuing a digital 
euro  and  on  its  possible  design.  The  report  was  followed  by  the  “Public  consultation  on  a 
digital  euro”, which was launched on 12 October 2020 and  ran until  12  January 2021.  The 
consultation  included  18  questions  aimed  at  collecting  the  views  of  both  citizens  and 
professionals.  The  first  part  was  aimed  mainly  at  citizens  in  their  role  as  users,  while  the 
second  targeted  primarily  financial,  payment  and  technology  professionals  with  specific 
knowledge  of  the  economics,  regulation  and  technology  of  (retail)  payments.  However, 
respondents were invited to provide feedback on the full set of questions. This report sets out 
the  results  of  the  analyses  of  the  8,221  responses  submitted  by  participants  in  the  public 
consultation.  

Overview of respondents  

94% of the respondents identified themselves as citizens and 6% as professionals. The sample 
of respondents is biased in terms of gender, industry and country of residence. Men account 
for  87%  of  citizen  respondents.  A  third  of  the  professionals  identify  themselves  as  tech 
companies. Most contributions originate from three countries: 47% from Germany, 15% from 
Italy and 11% from France. Five other European countries provided 1-5% of replies, with the 
rest  accounting  for  less  than  1%  each.  When  reading  this  report,  it  should  be  taken  into 
account  that  these  biased  demographic  characteristics  do  not  represent  the  euro  area 
population.  The  replies  from  both  citizens  and  professionals  do,  however,  provide  valuable 
input to the Eurosystem’s reflections on a digital euro. 

Possible features of a digital euro  

Privacy  is  considered  the  most  important  feature  of  a  digital  euro  by  both  citizens  and 
professionals  participating  in  the  consultation,  especially  merchants  and  other  companies 
(often  self-employed  professionals).  When  identifying  the  whole  possible  package  of  most 
preferable  options,  citizens  participating  in  the  consultation  consistently  opt  for  privacy, 
security, usability throughout the euro area, absence of additional costs and usability offline. 
When confronted with a specific choice between an offline digital euro focused on privacy, 
an online one with innovative features and additional services, and a combination of the two, 
citizen  respondents  generally  opt  for  an  offline  solution  focused  on  privacy,  while 
professional  respondents  consider  a  hybrid  approach  more  appealing.  Among  the  main 
challenges associated with a digital euro, citizen respondents identify those related to privacy 
and, especially when considering accessibility, simplicity in its use as a means of payment. 
Professional  respondents  identify  similar  challenges,  as  well  as  additional  ones  related  to 
poor internet connectivity in some areas. 

224 https://www.ecb.europa.eu/pub/pdf/other/Eurosystem_report_on_the_public_consultation_on_a_digital_euro~539fa8cd8d.en.pdf 

98 

 
 
 
 
 
                                                           
Provision of digital euro payment services  

Both citizens and professionals in the sample generally agree that the digital euro should be 
integrated  into  existing  banking  and  payment  solutions.  All  types  of  respondents  favour 
licensing  and  oversight  of  the  intermediaries  to  ensure  that  digital  euro  services  include 
appropriate user protections, especially with regard to possible misuse of data and concerns 
about the safety of services related to a digital euro. Notwithstanding the attention to privacy, 
both citizen and professional respondents support the requirements to avoid illicit activities, 
and only less than one in ten citizens are in favour of anonymity. Although many suggest that 
some identification of users should be facilitated, the privacy of payment data is considered 
the  most  important  feature,  ranging  from  full  privacy  of  transactions  to  the  possibility  that 
only  low-risk  small  transactions  are  private.  Most  citizen  and  professional  respondents 
believe  that  digital  euro  payments  should  be  integrated  into  existing  payment  solutions  or 
products  and  that  additional  services  should  be  provided  on  top  of  basic  digital  euro 
payments, with conditional payments as the most popular choice. They suggest a number of 
solutions for preventing counterfeiting and technical errors, and to ensure that the amount of 
digital  euro  in  circulation  is  equal  to  that  issued  by  the  central  bank,  including  blockchain, 
cryptography and licensed software or hardware. 

Technical solutions  

According  to  a  quarter  of  the  citizen  respondents,  hardware  end-user  solutions  comprising 
(smart) cards or a secure element in devices such as smartphones are the best technical option 
to  facilitate  cash-like  features.  Of  professional  respondents,  a  third  consider  that  end-user 
solutions (i.e. either software solutions like wallets and apps and/or hardware solutions like 
cards,  a  secure  element  in  a  device  and  a  dedicated  storage  or  device)  are  the  best  way  to 
support  cash-like  features,  while  another  third  prefer  a  combination  of  end-user  solutions 
with  the  back-end  infrastructure,  many  referring  to  decentralised  infrastructures.  Many 
respondents  believe  that  all  available  hardware  and  software  solutions  for  electronic 
payments  could  be  adapted  for  a  digital  euro,  provided  that  their  level  of  protection  is 
sufficient to support trust in safety and security as a key feature of a digital euro. 

Tools to avoid macroeconomic consequences  

Almost half of citizen respondents mention a need for holding limits, tiered remuneration, or 
a combination of the two, to manage the amount of digital euro that would be in circulation. 
A similar share of professional respondents agree. Tiered remuneration is especially popular 
among the research  community, while holding limits  are favoured by  credit institutions.  At 
the same time, about a third of citizen respondents and professionals classified as merchants 
reject any tool aiming to avoid the circulation of excessive amounts of digital euro as a risk-
free form of investment. In order to avoid tiered remuneration having a negative effect on the 
usability of a digital euro, both citizen and professional respondents state that the limit or first 
tier  should  be  large  enough  for  retail  payment  needs.  Besides  delayed  settlement  of 
transactions,  few  respondents  suggest  any  specific  solution  for  making  tiering  compatible 
with  offline  use.  Where  holding  limits  are  imposed,  respondents  agree  that  the  best  way  to 
allow incoming payments above that limit is by automatically transferring the excess digital 
euro to an account held with a private institution. 

99 

 
 
 
 
International payments 

When  questioned  about  cross-currency  payments,  citizen  respondents  value  speed  of  cross-
border  payments  (mentioning  that  instant  payments  should  be  possible),  cost  and 
transparency of exchange rates. At least a third of them mention one of these three aspects. A 
large majority of citizen respondents consider that the use of digital euro outside the euro area 
should not be limited, provided that safety and security are ensured, which is also the view of 
most professional respondents. Nevertheless, one in ten citizens consider that it could be used 
cross-border but with limits. Additionally, with regard to cross-border payments professional 
respondents focus mostly on the issue of interoperability (around a third of respondents) and 
the  role  of  intermediaries  (a  fifth  of  respondents)  either  as  settlement  agents  or,  to  a  lesser 
extent, gatekeepers. 

II. 

Summary of a ECB commissioned study on new digital payment methods225 

The  most  desirable  features  of  a  future  digital  payment  method  for  the  majority  of 
participants in the general public and the tech-savvy groups are: 

• 

• 

• 

• 

• 
• 

• 

Universal acceptance: widely accepted in all kinds of physical shops and online across 
Europe, for all types of amounts. 
Contactless  and  instant  person-to-person  payments:  no  matter  what  system  the 
recipient is using.  
A  one-stop-solution:  integrating  multiple  payment  methods,  quick  and  easy  to  use, 
with contactless payments or customisable financial reporting functions. 
Safe  and  secure:  biometric  verification,  protection  from  fraud  and  hacking,  with 
authentication of payments.  
Cost-efficiency: no cost or low fees.  
Financial privacy (a digital wallet specific feature): while financial privacy is not top 
of  mind,  when  probed,  flexible  privacy  settings  that  can  be  adjusted  to  suit  the 
payment occasion were preferred. 
Funding (a digital wallet specific feature): customisable manual funding with payment 
reminders when the balance of the digital euro wallet is getting low, and an option for 
automatic top-ups.  

Merchants would seek the following features from a new digital payment method: 

• 

• 

• 

High demand from customers is an overarching key driver for merchants to accept a 
new payment method. 
Low  fees:  once  there  is  a  high  demand  from  customers  and  as  long  as  fees  are  not 
higher than other current payment methods merchants are more likely to accept a new 
payment method. 
Speed  of  transactions:  instant  payments  were  very  attractive  for  merchants.  The 
element of instantaneity in payment was seen a strong point and a motivating factor 
for usage. It makes cash flow management easier. Merchants perceive the possibility 
of  immediate  payment,  which  could  be  one  of  the  features  of  this  new  payment 
instrument, as a significant advantage.  

225 https://www.ecb.europa.eu/paym/digital_euro/investigation/profuse/shared/files/dedocs/ecb.dedocs220330_report.en.pdf 

100 

 
 
 
 
                                                           
• 

• 

• 

Technically  reliable  and  backed  up  by  good  customer  service:  easy  to  receive  such 
payments,  for  instance  by  scanning  something  with  their  phone  (QR  code,  etc.)  or 
using their existing technology, intuitive and easy to use.  
Good  integration  with  their  day-to-day  business  activities:  integration  of  accounting 
tools,  cash  back,  bonus  points,  marketing  activities  in  connection  with  the 
introduction of a new payment service.  
Security and safety assurances for both merchants and their customers are particularly 
important features.  

The unbanked, underbanked and offline population look for the following features in a new 
digital payment method:  

• 

• 

• 

• 

Easy to use without requiring technological digital skills: having the same elements as 
their current payment methods – to be able to pay cash, withdraw money with a card, 
make  automatic  payments  and  have  a  monthly  statement;  the  possibility  of  offline 
usage without an internet connection. 
Safe and secure: personal information to be kept secure, protection against misuse in 
the event of loss and theft.  
Free: low or no fees, no maintenance costs and the possibility of borrowing a certain 
amount of money for more difficult months.  
Backed up by a robust customer support system: supported by personal contact with a 
preference  for  face-to-face  support  to  set-up  and  start  using  the  device  or  payment 
method. Known channels, such as their existing bank contacts, and backing from the 
banking system and public financial institutions will help win over some underbanked 
and offline participants. 

101 

 
 
 
 
 
III.  Results of the Commission’s targeted consultation on the digital euro 

Disclaimer:  The  contributions  received  to  the  targeted  consultation  on  the  digital  euro  cannot  be 
viewed as the official position of the Commission on the topics covered and thus does not bind the 
Commission.  Contributions  received  to  this  targeted  consultations  cannot  be  considered  as  a 
representative sample of the views of the EU’s population, businesses or else. 

Introduction 

On  5  April  2022,  the  European  Commission  launched  a  targeted  consultation  on  a  digital 
euro. The consultation closed on 16 June 2022.  

The purpose of the targeted consultation  was to  complement the ECB’s  public consultation 
on a digital euro with further information gathered from industry specialists, payment service 
providers  (including  credit  institutions,  payment  and  e-money  institutions),  payment 
infrastructure providers, developers of payment solutions, merchants, merchant associations, 
retail  payments  regulators,  and  supervisors,  anti-money  laundering  (AML)  supervisors, 
financial  intelligence  units,  and  other  relevant  authorities  and  experts  as  well  as  consumer 
organisations,  in  order  to  feed  in  the  impact  assessment  prepared  by  the  European 
Commission in view of the upcoming Regulation on a digital euro. 

Respondents’ views were collected upon 7 topics: 

1.  Users’ needs and expectations for a digital euro 
2.  The digital euro’s role for the EU’s retail payments and the digital economy 
3.  Making the digital euro available for retail use while continuing to safeguard the legal 

tender status of euro cash 

4.  The digital euro’s impact on the financial sector and the financial stability  
5.  Application  of  anti-money  laundering  and  counter  terrorist  financing  (AML-CFT) 

rules 

6.  The privacy and data protection aspects  
7.  International payments with a digital euro 

Overview of respondents and responses 

The  Commission  received  312  responses.  While  the  consultation  was  targeted  at  experts 
and  professionals  188  contribution  also  came  from  individuals  and  124  came  from  the 
targeted professional respondents.  

Individuals  replied  from  almost  all  Eurozone  Member  States,  including  37%  from 
Slovakia, 14% from Belgium, 12% from Germany, 6% from Italy, 6% from Netherlands, 
5% from France and 4% from Spain. Few replies came also from outside of the Eurozone.  

Most  professional  respondents  (all  respondents  except  individuals  or  citizens)  were 
payment  services  providers.  Out  of  the  124  professional  respondents,  half  of  them  were 
companies  (62),  a  quarter  were  business  associations  (33).  There  were  20  financial  sector 
associations, 19 credit institutions, 14 payment service providers (PSPs) other than banks,  6 
PSPs associations, 5 merchants and 7 merchant organizations. Answers from 15 technology 
service  providers  and  10  IT  solution  providers  for  payment  services  were  also  received. 
Additionally, 7 crypto asset services providers and 4 market infrastructure operators provided 

102 

 
 
 
 
 
answers.  5  consumer  organizations  replied  to  the  consultation.  In  addition,  4  academics,  6 
public authorities, 5 NGOs and 9 other respondents provided answers. 

Breakdown per type of stakeholder (all replies): 

Breakdown  per  Member  State/country 
replies): 

(all 

In  the  absence  of  a  sampling  technique,  answers  cannot  be  considered  representative,  also 
considering  that  a  significant  number  of  respondents  either  did  not  answer  or  showed  no 
opinion on almost all questions (sometimes above 50% e.g. on AMLCFT). One explanation 
could be that not all respondents may have sufficient knowledge or show interest in all topics. 

Summary of respondents’ feedback226 

1. Users’ needs and expectations for a digital euro 

As far as people are concerned, fast, private, cost free and widely available digital euro 
would be most desired. Almost half of EU citizens ranked instant settlement (86 out of 188, 
46%), flexible privacy settings (85 out of 188, 45%), cost free use (85 out of 188, 45%), wide 
availability  and  easy  on-boarding  (84  out  of  188,  45%)  as  top  features.  Slightly  more  than 
half of EU citizens (99 out of 188, 53%) subsequently considered preserving privacy and data 
protection  in  payments  as  a  main  policy  objective.  EU  citizens  also  ranked  ability  to  pay 
offline  (81  out  of  188,  43%),  ability  to  pay  anytime,  anywhere  to  anyone  (76  out  of  188, 
40%), and easy to use (65 out of 188, 35%) as prominent design options. Most professional 
respondents considered wide availability and easy onboarding (91 out of 124, 73%), easy to 
use (86 out of 124, 69%), ability to pay anytime, anywhere to anyone (86 out of 124, 69%), 
and instant settlement (86 out of 124, 69%) as the most important aspects to be offered to the 
general public. Professional respondents also regarded cost free use (78 out of 124, 63%) as a 
prominent  feature.  They  also  deemed  flexible  privacy  settings  and  offline  payments  as 
important  (65  out  of  124,  52%).  Specifically,  consumer  associations  emphasized  cost  free 
use and preservation of privacy as essential elements of a digital euro although they appeared 
sceptical  about  flexible  privacy  settings.  They  also  considered  anonymity  and  security  as 
crucial elements.  

226 When calculating percentages we always used the total number of individual (188) and professional respondents (124) as denominators, 
even if the actual number of respondents to a particular question was less than that. This methodology was chosen to avoid giving too much 
weight to a few answers in cases where only few participants responded. Conversely, the presented percentages may give too much weight 
to the non-respondents, which should be considered when reading these results. 

103 

 
 
 
 
 
                                                           
Other  desired  benefits  for  the  digital  euro  highlighted  by  respondents  from  different 
categories  include  the  protection  of  funds  from  any  government  intervention,  the 
compatibility  with  private  blockchains,  the  competitiveness  with  cards  schemes,  cash  like 
features and international payments.  

People-to-People  (P2P)  and  offline payments  would  benefit  people  the  most.  Many  EU 
citizens  attributed  high  importance  for  paying  in  digital  euro  in  a  low  connectivity 
environment - offline (61 out of 188, 32%), paying to another natural person both face to face 
(62  out  of  188,  33%)  and  remotely  (56  out  of  188,  30%).  They  (52  out  of  188,  28%)  also 
considered  e-commerce  as  a  payment  situation  where  the  digital  euro  would  bring  value 
added whereas fewer respondents (43 out of 188, 23%) shared similar views as regards POS 
payments. The majority of professional respondents considered that offline payments peer-
to-peer payments would bring most value added for people (69 out of 124, 56%). At the same 
time many of them also considered that the digital euro would add significant value to shops 
(55  out  of  124,  44%)  and  e-commerce  (57  out  of  124,  46%).  Specifically,  consumer 
organisations saw the digital euro as a digital equivalent to cash: consequently, the priorities 
should be firstly payment in shops, second P2P payments and, third online payments. 

Payment  services  providers  stressed  that  commercial  banks’  payment  offer  fulfils 
almost all needs already and that the added value of a retail digital euro to EU citizens 
would be limited. They advocated targeting payment segments that are insufficiently served 
by the private sector. Some suggested developing an offline digital euro while others called 
for 
including  machine-to-machine  and  micro-payments.  Some 
consumer organisations on the other hand supported the digital euro owing to the fact that 
more  and  more  people  were  using  electronic  payment  options:  they  feared  that  without  a 
digital  euro  other  non-European  payment  solutions,  CBDCs  or  stablecoins  might  take  the 
lead.  

innovative  payments, 

Respondents attached importance to providing access to public money in a digital form 
for  everyone.  EU  citizens  valued  the  objective  of  providing  access  to  public  money  for 
everyone  (75  out  of  188,  40%)  and  for  the  unbanked  people  (73  out  of  188,  39%)  as  very 
important or important. Some EU citizens also regarded lower payment cost (66 out of 188, 
35%), pan European payments (66 out of 188, 35%), helping people with disability and less 
digital  skills  (64  out  of  188,  34%)  and  monetary  sovereignty  (63  out  of  188,  34%)  as 
important or very important. Most professional respondents believed that providing access 
to public money in digital form to everyone (80 out of 124, 64%), and preserving privacy and 
data  protection  in  payments  (79  out  of  124,  64%)  were  important  or  very  important. 
Protecting monetary sovereignty (76 out of 124, 61%), enabling pan-European payments (76 
out  of 124, 61%), providing an alternative to  emerging stablecoins  and foreign CBDCs  (74 
out  of  124,  60%),  fostering  the  development  of  the  EU’s  digital  economy  (68  out  of  124, 
55%), strengthening the open strategic autonomy for the EU (68 out of 124, 55%) were also 
deemed  important  or  very  important.  Consumer  organisations  emphasised  the  need  for  a 
broad access to the digital euro. 

Easily accessible digital euro without any bank account was viewed as a way to support 
financial  inclusion.  In  this  context,  EU  citizens  believed  that  there  should  be  no  need  to 
open  a  bank  account  (75  out  of  188,  40%).  Offline  peer-to-peer  payments  (72  out  of  188, 
38%), easy onboarding (71 out of 188, 38%), easy payment (65 out of 188, 35%) and easy to 
use  devices  (e.g.  chipcards)  (61  out  of  188,  32%)  were  also  deemed  as  important  or  very 
important by some EU citizens. Professional respondents thought that easy onboarding (90 
out  of  124,  73%)  and  easy  payments  (89  out  of  124,  72%)  were  the  two  most  important 
features  to  support  financial  inclusion.  The  vast  majority  of  professional  respondents  also 

104 

 
 
regarded  offline  payments,  accessible  devices,  and  no  need  for  a  bank  account  as  strong 
features. Consumer organisations advocated for an easy onboarding process and accessible 
devices. 

Real  time  settlements  and  standards  for  an  EU-wide  acceptance  infrastructure  were 
particularly favoured by merchants. Professional respondents in general believed that for 
merchants the most important aspects of a digital euro would be real time settlement (83 out 
of  124,  67%),  standards  for  EU-wide  acceptance  infrastructure  (82  out  of  124,  66%),  low 
acquiring fees (74 out of 124, 60%) and offline payments (70 out of 124, 56%). They did not 
think that the digital euro could lead to better services for merchants. They could not decide 
whether  the  digital  euro  should  be  an  account  or  bearer-based  instrument.  Merchants  and 
their  organizations  shared  this  view.  They  saw  low  costs  (close  to  zero)  as  the  most 
important  features,  followed  by  standards  for  EU-wide  acceptance  infrastructure,  offline 
payments and real time settlement. 

According  to  professional  respondents,  the  digital  euro  may  bring  benefit  to 
businesses/merchants  in  all  payment  situations.  Respondents  took  the  view  that  offline 
payments  would  bring  significant  value  added  (40  out  of  124,  32%)  and  trade  finance  the 
least (21 out of 124, 17%). About 50-55 out of 124 professional respondents (40% to 44%) 
considered that the digital euro would bring some or significant added value in POS and e-
commerce.  

Some  professional  respondents  rated  machine-to-machine  (M2M)  payments  in  the 
context of industry 4.0 and Internet of Things as an added value for people  (51 out  of 
124  respondents;  41%),  merchants  and  businesses  (52  out  of  124  respondents,  42%). 
Professional  respondents  described  M2M  payments  as  an  “important  driver  of  payment 
innovation  in  the  digital  economy”,  and  as  a  “useful  tool”  representing  a  growing  market 
currently “underdeveloped in Europe”. 

105 

 
 
The chart above shows the aggregated replies of both people and professional respondents. 

106 

 
 
 
 
 
 
2. The digital euro’s role for the EU’s retail payments and the digital economy 

The digital euro’s role in supporting pan-European payments and strengthening Europe’s 
open strategic autonomy 

A widely available digital euro is expected to support the EU’s open strategic autonomy. 
According to the majority of professional respondents, the most important feature of a digital 
euro to strengthen EU’s open strategic autonomy would be to offer a public digital means of 
payment  through  all  available  payment  solutions  (76  out  of  124  professional  respondents, 
61%). The majority of professional respondents (74 out of 124, 60%) also considered offline 
peer-to-peer  transactions  in  digital  format  as  very  important  or  important  for  EU’s  open 
strategic autonomy. Similarly, a new form of pan-European instant payment complementing 
the existing offer at the points of sale with a (quasi) universal acceptance in both physical and 
online  shops  was  deemed  important  (70  out  of  124,  56%).  Interestingly,  without  (quasi) 
universal  acceptance,  such  a  payment  was  only  seen  as  important  by  24  out  of  124 
respondents  (19%)  while  48  out  of  124  (39%)  saw  it  as  not  important.  Professional 
respondents  doubted that without (quasi) universal  acceptance usage the  digital  euro would 
take-up  rapidly.  They  also  noted  however,  that  (quasi)  universal  acceptance  would  not  be 
sufficient  to  drive  consumer  adoption,  given  that,  from  a  retail  customer  perspective, 
currently  available solutions were universal  as well. Credit institutions believed that offline 
and  conditional  payments  and  a  public  digital  means  of  payment  through  all  available 
payment  solutions  would  support  most  the  EU’s  open  strategic  autonomy.  Most  consumer 
organisation  mentioned  universal  acceptance  and  offline  payments  as  most  important. 
Merchants  ranked  ‘a  public  digital  means  of  payment  through  all  available  payment 
solutions’ as the most important in this aspects. 

A  digital  means  of  payment  allowing  for  online  third  party  validation  of  transactions 
received mixed opinions among professional respondents. 42 out of 124 (34%) perceived 
it  as  important  to  support  pan-European  payments  and  to  strengthen  EU’s  open  strategic 
autonomy, whereas 18 out of 124 (15%) assessed it as not important and 24 out of 124 (19%) 
stayed  neutral.  Professional  respondents  pointed  to  the  existing  well-developed  payment 
ecosystem (SEPA, credit transfers and direct debit, international cards and wallets) and to the 
ongoing initiatives (EPI, instant payments) to improve it further. It was also noted that people 
could  mix  digital  euro  with  instant  payment  solutions  offered  by  the  private  sector,  which 
already incurred implementation costs for PSPs and merchants. 

Professional respondents also mentioned the following aspects, which might strengthen 
further the EU’s open strategic autonomy: 

  To  compete  with  foreign  CBDCs  and  crypto-assets,  the  digital  euro  should  take 

advantage of the potential of DLT. 

  Key  infrastructures  as  well  as  the  initiation  of  most  digital  euro  transactions  should 

not be left to non-European players.  

  European players from the private sector should be involved in the maintenance and 

operations of the digital euro. 

  Digital  euro  infrastructures  should  adapt  to  future  market  and  technological 

developments as well as to new functionalities.  

  The  model  used  for  the  introduction  of  the  digital  euro  should  be  resilient;  for 

example, it should not create single points of failure. 

107 

 
 
 
  Promoting  an  open  payment  and  data  policy  agenda  should  be  key  to  EU’s  open 

strategic autonomy. 

  The  digital  euro  should  be  modelled  on  the  existing  intermediated  system  and 
designed  to  allow  banks  as  well  as  non-bank  PSPs  to  build  innovative  payment 
solutions. 

  End user solutions should be simple and user friendly to guarantee the uptake of the 

digital euro. 

  The digital euro should interoperate with the private sector infrastructure and payment 
solutions.  The  digital  euro  should  be  offered  through  payment  solutions  that  are 
already available. 

An  intermediated  digital  euro  could  contribute  to  the  development  of  the  EU’s  retail 
payment  market.  According  to  professional  respondents,  the  best  way  to  support  a 
diversified and competitive retail payment market where a variety of payment providers offer 
a broad range of payment solutions would be to ensure that the digital euro is distributed via 
regulated  financial  intermediaries  such  as  PSPs.  80  out  of  124  professional  respondents 
(70%) believed that this distribution model would positively impact the EU’s retail payment 
market, whereas only 10 out of 124 (8%) thought it would have a negative impact and 9 out 
of  124  (7%)  stayed  neutral.  Nevertheless,  some  professional  respondents  warned  that 
distributing the digital euro via financial intermediaries might hinder its take-up as the digital 
euro  would  compete  with  private  sector  solutions  provided  by  these  same  intermediaries, 
which would have no incentive to  promote the digital  euro. Some professional respondents 
also  suggested  that  a  diversified  and  competitive  EU’s  retail  payments  market  would  be 
significantly  fostered  by  the  coexistence  of  private  and  public  intermediaries,  which  could 
have  complementary  actions,  for  instance  public  intermediaries  would  be  better  suited  to 
serve  currently  financially  excluded  populations.  Others  recommended  that  non-bank  PSPs 
should also have access to the digital euro system as they could build added-value payment 
solutions  on  top  of  it.  Eventually,  it  was  suggested  that  the  digital  euro  should  be 
interoperable  with  both  the  existing  traditional  financial  sector,  as  well  as  the  crypto-asset 
service provider sector, at the European and the international levels alike.  

to  positively  affect 

Offering another form of central bank money in the context of a declining use of cash 
for  payments  was  also  deemed 
the  diversification  and 
competitiveness  of  the  EU’s  retail  payment  market.  70  out  of  124  professional 
respondents  (56%)  supported  this  view.  In  addition,  professional  respondents  requested 
avoiding  too  favourable  conditions  that  could  strongly  influence  the  EU’s  retail  payments 
market  at  the  detriment  of  private  means  of  payment,  (i.e.  free  of  charge,  mandatory 
acceptance),  and  would  result  in  unbalanced  competition.  For  instance,  a  free  digital  euro 
should be limited to cash-like payments such as small offline peer-to-peer payments. It was 
stressed that distribution models whereby significant costs and risks would be placed onto the 
intermediary layer without commensurate compensation may only attract intermediaries with 
business models that depend on extracting maximum economic value from user data, such as 
BigTech providers. 

Using  the  digital  euro  acceptance  network  to  foster  pan-European  private  sector 
initiatives may also positively affect the retail payment markets’ competitiveness. 69 out 
of  124  professional  respondents  (56%)  thought  it  would  have  a  positive  impact.  Reusing 
existing front and back-end infrastructures should reduce implementation costs and accelerate 
the deployment of a digital euro. 

Holding caps or interest and fees on large holdings to limit the store of value function of 
a  digital  euro  was  seen  in  a  mixed  way.  38  out  of  124  professional  respondents  (31%) 

108 

 
 
thought that it would have a positive impact on the EU’s retail market development whereas 
30  out  of  124  (24%)  thought  it  would  negatively  affect  the  diversification  and 
competitiveness of the EU’s retail payment market. Some professional respondents believed 
that limits on holdings/transactions would not hamper the uptake of a digital euro, as limits 
on  individual  transactions  already  existed  in  different  member  states  for  different  payment 
methods,  such  as  cash  and  instant  payments.  In  addition,  the  EU  regulation  provided  for 
limits  on  prepaid  cards  on  the  ground  of  AML/CFT.  Other  professional  respondents 
cautioned  against the high probability that  in  crisis times, any  limit  may be lifted owing to 
political and societal pressure. 

The chart above shows the aggregated replies of both people and professional respondents. 

The digital euro’s role for the digital economy 

109 

 
 
 
 
According  to  professional  respondents,  the  most  important  option  for  a  digital  euro 
supporting  the  development  of  the  EU  digital  economy  would  be  the  possibility  to 
integrate it with other payments solutions, independently of the technology used. 73% of 
professional  respondents  (91  out  of  124)  marked  it  as  either  very  important  or  important. 
Professional  respondents  (64  out  of  124,  52%)  also  widely  supported  the  possibility  for 
micro and stream payments227 using the digital euro. 38 of them (31%) assessed it as very 
important and 26 (21%) as important. 

Offering  conditional  payments  functionalities  through  the  digital  euro  gathered  the 
support  of  about  55%  of  professional  respondents  (68  out  of  124),  which  pointed  to  a 
series of arguments such as: 

  Technically innovative setup  
  Offer of value-added services 
  Speed/efficiency in the processing of cross-border payments between intermediaries 
  Automation of securities settlement through digital delivery versus payment 
  Tokenisation of digital assets would need “cash on ledger” solutions 
  Micro-payments or pay-per use models 

The possibility to program conditional payments was quoted by professional respondents as a 
“crucial”  and  “attractive  feature”,  particularly  for  later  developments  of  the  digital  euro. 
However,  in  some  occurrences,  professional  respondents  questioned  the  urgency  to  offer 
M2M, considering that conditional money was not necessarily a prerogative of central bank 
money,  and  could  also  be  achieved  through  private  sector  solutions  or  a  combination  of 
public and private developments.   

A digital euro was seen as important for providing a European public alternative to emerging 
new payments solutions such as crypto-assets, stablecoins and foreign CBDC. 74 out of 124 
professional  respondents  (60%)  flagged  this  as  a  positive  outcome,  while  57  assessed  EU 
public money  as  an alternative to  private solutions and foreign CBDCs  as a very important 
goal,  and  17  (14%)  as  important.  One  professional  respondent  flagged  that  “If  the  digital 
Euro  was  not  designed  with  programmability  features,  it  would  bring  less  added  value 
especially in case of paying for goods or service “at a point of sale” or in e-commerce due to 
the  existence  of  different  and  efficient  payment  methods  that  have  been  specifically 
developed for these sectors”. 

On the importance of digital means of payment offering conditional payment features for the 
EU’s open strategic autonomy, 48% of professional respondents (59 out of 124) found it as 
either  very  important  (33  respondents;  27%)  or  rather  important  (26  respondents;  21%), 
whilst only 12% of respondents (15 out of 124) assessed it as either not important or rather 
not important. 

Almost  half  of  the  professional  respondents  (56  out  of  124,  45%)  saw  the  inclusion  of 
M2M payments for industry 4.0 and Internet of Things as a positive factor to support 
the EU’s digital economy , while only 9% of professional respondents (11 out of 124) saw it 
as a rather negative factor.  

The  integration  with  platforms  relying  on  distributed  ledger  technology  (DLT)  for 
smart  contract  applications  beyond  payment  use  cases  was  considered  as  a  positive 

227 Stream payments are continuous execution of micro payments in parallel with the use of a service such as 
internet, electricity, media etc. 

110 

 
 
                                                           
factor by 51% of professional respondents (63 out of 124), whilst 10% saw it as a rather 
negative factor (12 out of 124).  

The interconnection with the European Digital Identity Wallet was requested by about 
half  of  professional  respondents  (59  out  of  124,  48%).  Only  12%  of  professional 
respondents (15 out of 124) expressed a negative opinion.  

3. Making the digital euro available for retail use while continuing to safeguard the legal 
tender status of euro cash 

Possible introduction of legal tender for the digital euro 

69 out of 124 professional respondents (56%) supported granting the digital euro a legal 
tender  status,  with  unequivocal  support  from  merchants  and  consumers  whereas  only  a 
minority  of  financial  institutions  favoured  this  proposal.  Many  respondents  viewed  legal 
tender as a necessary instrument to ensure legal certainty and wide acceptance of the digital 
euro across the EU, although the specific design of the digital euro was also acknowledged to 
be  a  key  driver  to  make  it  an  attractive  means  of  payment.  14  out  of  124  professional 
respondents  (11%)  were  opposed  to  such  a  measure,  mostly  financial  institutions  and 
payment service providers/market infrastructures. They highlighted that attractiveness of the 
digital euro as a means of payment would mostly depend on its design and cautioned against 
creating an uneven level playing field with other private payment solutions, as well as against 
creating disincentives to innovation. 15 out of 124 professional respondents (12%) appeared 
neutral,  mostly  financial institutions. They  also  highlighted that  attractiveness  of the digital 
euro  as  a  means  of  payment  would  mostly  depend  on  its  design  and  cautioned  against 
creating an uneven level playing field with other private payment solutions, calling towards 
exceptions  to  the  principle  of  mandatory  acceptance.  One  respondent  stated  that  the  legal 
tender  status  might  be  justified  for  use  cases  that  are  not  already  covered  by  the  private 
sector. 24 (19%) did not answer. 

70  out  of  124  professional  respondents  (56%)  appeared  in  favour  of  regulating  legal 
tender in detail at Union level, with wide support from merchants and consumers whereas a 
majority  of  financial  institutions  and  service  providers/market  infrastructures  also  favoured 
this proposal, including some respondents who claimed a neutral stance or opposed granting 
the digital euro a legal tender status, owing to the necessity to provide transparency and legal 
certainty  on  the  meaning  of  the  legal  tender  status,  define  harmonise  rules  and  prevent 
fragmentation  across  Member  States,  and  guarantee  consumer  choice  between  different 
means of payment. A few respondents cautioned against the definition of too complex rules 
that may render the digital euro unattractive compared to cash or private means of payment. 
10  out  of  124  professional  respondents  (8%)  were  of  the  opposite  view.  One  professional 
respondent commented that no legal tender regulation for cash existed at the EU level.  It is 
worth  mentioning  that  several  financial  institutions  did  not  form  an  opinion,  partly  as  a 
consequence of their neutral or negative stance on the question of granting the digital euro a 
legal tender status. 42 (34%) did not answer. 

66 out of 124 professional respondents (54%) considered that the legal tender status of 
the  digital  euro  should  take  inspiration  from  the  current  legal  tender  status  of 
banknotes  and  coins,  with  wide  support  from  consumers  whereas  a  majority  of  financial 
institutions and service providers/market infrastructures also favoured this proposal, to ensure 
wide adoption and sound business models, while providing for some adaptations (e.g. gradual 
implementation, exceptions for merchants that do not offer digital means of payment). Some 

111 

 
 
 
professional respondents advocated for ensuring a level playing field in terms of acceptance 
of  other  digital  means  of  payment,  cautioning  against  the  risk  of  creating  a  competitive 
distortion.  14  out  of  124  professional  respondents  (11%)  showed  reluctance  to  align  legal 
tender  regimes,  mostly  merchants  who  were  of  the  view  that  exceptions  to  mandatory 
acceptance were not justified in the case of a digital euro under specific conditions. Several 
other  professional  respondents  highlighted  the  absence  of  harmonised  rules  on  legal  tender 
for euro cash. Again, it is worth mentioning that several financial institutions did not form an 
opinion, partly as a consequence of their neutral stance on the question of granting the digital 
euro a legal tender status. 42 (34%) did not answer. 

59  out  of  124  professional  respondents  (48%),  with  wide  support  from  financial 
institutions,  supported  exceptions  to  the  legal  tender  status  of  the  digital  euro  with  a 
preference  for  exceptions  on  merchants  that  do  not  accept  digital  means  of  payment 
(also  backed  by  BEUC)  and  exceptions  further  specified  by  Member  States.  Other 
exceptions included unanticipated technical, operational or other disabilities (e.g. no internet 
connexion),  as  well  as  legal  considerations  (freedom  of  contract).  Very  few  respondents 
supported exceptions for small merchants. Several professional respondents proposed to set-
up exceptions on a temporary basis (e.g. gradual update of the acceptance infrastructure). 33 
out of 124 professional respondents (27%) showed reluctance to granting exceptions owing to 
the principle of mandatory acceptance, mostly merchants. 30 (24%) did not answer. 

51  out  of  124  professional  respondents  (41%)  considered  necessary  that  exceptions 
proposed by Member States are subject to approval by the European Commission after 
consulting  the  ECB,  highlighting  considerations  such  as  legal  certainty  and  level  playing 
field  issues,  potential  barriers  to  the  adoption  of  the  digital  euro,  complexity  for  end-users, 
fragmentation  of  payment  systems,  or  increases  in  costs.  19  out  of  124  professional 
respondents  (15%)  considered  unnecessary  to  ask  for  prior  approval,  with  some  of  them 
commenting that they were against local rules. A handful of professional respondents were of 
the view that local rules could apply without being subject to prior approval. No explanation 
was given however. 52 (42%) did not answer. 

41 out of 124 professional respondents (33%) rejected any provision for administrative 
sanctions  in  case  of  digital  euro  non-acceptance,  among  them  an  important  number  of 
financial institutions (e.g. European Banking Federation), who insisted on the need to  align 
with the regime for cash. Other recurring arguments pointed to the freedom of contracts, the 
need  to  render  the  digital  euro  attractive,  and  the  disproportion  of  imposing  administrative 
sanctions  at  this  stage  (e.g.  gradual  implementation  of  the  digital  euro).  33  out  of  124 
professional respondents (27%) were of the opposite view, among them prominent merchant 
and  consumer  representatives  (e.g.  Eurocommerce,  BEUC),  with  arguments  related  to  the 
need to foster the use of the digital euro to counteract the spreading of foreign central bank 
currencies, the importance of enforcing rules via the capacity to apply sanctions, and the need 
to  align  on  the  regime  for  cash.  A  few  professional  respondents  pointed  to  differences  in 
sanction  regimes  for  cash  across  countries.  A  few  professional  respondents  also  stated  that 
sanctions could not apply to private individuals. 48 (39%) did not answer. 

76 out of 124 professional respondents (61%) were of the view that governments should 
always  propose  the  digital  euro  as  a  means  of  payment.  66  (53%)  also  highlighted  a 
similar concern for utilities providers, 61 (49%) for large companies and 59 (48%) for 
merchants  that  accept  a  private  electronic  means  of  payment.  A  few  professional 
respondents  suggested  including  other  entities  e.g.  small  merchants  to  allow  for  a  wide 
acceptance  of  the  digital  euro,  international  companies  trading  with  Europe,  or  non-
professionals. Whereas merchants mostly supported imposing the digital euro as a means of 

112 

 
 
payment  in  all  transactions,  views  appeared  split  within  the  financial  sector,  with  several 
credit institutions cautioning against inefficiencies and possible impacts on the acceptance of 
cash,  or  showing  hesitation  to  abandon  the  principle  of  contractual  freedom  despite 
acknowledged  benefits  of  such  a  measure.  Consumers  appeared  in  favour  of  imposing 
merchants that accept a private electronic means of payment to also offer the digital euro as 
an option. Consistency with the legal tender status, wide acceptance, and European strategic 
autonomy were reported as reasons to impose the digital euro as a means of payment. About 
44 (35%) did not answer. 

Estimation of costs 

In a context where technological and business developments might radically change the 
current  way  of  payment  acceptance,  irrespective  of  the  digital  euro,  44  out  of  124 
professional respondents (35%) considered that, despite still high investments, the cost 
of  acceptance  infrastructure  might  decrease  in  the  short  or  medium  term,  owing  to 
technological developments (e.g. use of mobile terminals), economies of scale (e.g. reuse of 
the  existing  acceptance  infrastructure),  and  competition  supported  by  proper  regulation. 
Conversely,  26  out  of  124  professional  respondents  (21%),  mostly  financial  institutions 
(e.g. Electronic Money Association, European Digital Payments Industry Alliance, European 
Savings and Retail Banking Group), considered that the cost of acceptance infrastructure 
might increase in the near future. The need to adapt systems to technological and business 
innovation,  to  comply  with  regulations  such  as  the  PSD  or  MICA,  to  upgrade  systems  on 
cybersecurity, and to train staff were most often quoted by respondents. In particular,  while 
smaller merchants might find it very expensive to on-board a completely new POS terminal 
with limited consumer demand to start with, larger merchant might struggle with bandwidth 
and  tech  resource  required  for  large  scale  implementation  of  a  new  payment  system  across 
their  footprint.  The  multiplication  of  means  of  payment  at  the  POS  or  online  might  also 
generate  new  costs.  Depending  on  its  design,  several  professional  respondents  viewed  the 
digital  euro  as  a  source  of  additional  costs  in  the  near  term.  The  extension  /  adjustment  of 
existing  infrastructures  for  a  digital  euro  will  require  development  of  IT  infrastructure, 
changes of devices  in  store, etc. This  will require significant  investment,  while the existing 
infrastructure will still need to  be supported. Much will depend on  the selected form  factor 
for a digital euro NFC/contactless or QR based. 

Regarding  the  digital  euro  specifically,  professional  respondents  reported  a  large 
variety  of  additional  one-off  and  recurrent  costs  merchants  might  face  in  case  they 
accept digital euro payments, including IT systems, customer management, training of 
staff,  legal  support  and  marketing.  Merchants  reported  that  it  was  impossible  to  predict 
future costs of the acceptance of payments in digital euro as the details of the design of the 
digital euro are still unknown. Cost is also very dependent on the individual merchant profile. 
Most professional respondents stated that a digital euro with legal tender might entail a higher 
overall cost owing to the number of businesses that may be imposed mandatory acceptance. 
No  major  differences  in  the  types  of  cost  were  reported  although  several  professional 
respondents  pointed  to  possible  differences  in  amounts  in  case  of  a  digital  euro  with  legal 
tender owing to economies of scale. Merchants suggested that the final design of the digital 
euro  should  permit  the  utilisation  of  existing  infrastructure  for  digital  payment  acceptance. 
Implementation should also fit with current hardware replacement and/or certification cycles. 

For  merchants  to  be  equipped  to  accept  the  digital  euro,  new  POS  terminals,  new 
software or new app-based POS solutions may be needed which will involve additional 

113 

 
 
 
cost. In particular, several professional respondents – whether merchants already offering or 
not  digital  means  of  payment  –  reported  moderate  one-off  costs  either  to  replace/upgrade 
payment  terminals  or software,  as well as moderate annual  costs for maintenance, licences, 
etc.  

Respondents provided an estimate of the incremental costs necessary to accept payments in 
digital euro:  

One  off  costs  related 
to  (new)  POS 
terminals  for  accepting payments  in  digital 
euro : 
One-off costs related to software: 
Annual cost for maintenance, licences etc. 

Merchants already 
accepting electronic 
payments 

Merchants not yet 
accepting electronic 
payments 

In EUR per terminal 
EUR 50-500 

In EUR per terminal 
EUR 100-1000 

EUR 10-500 
Insignificant - 100 

EUR 100-500 
Insignificant – 100 

Other  costs  were  quoted  such  as  licenses,  training,  and  marketing.  Yet,  companies  that 
already accept digital means of payments might face lower one-off costs. A few professional 
respondents  advocated  for  a  gradually  change  in  acceptance  infrastructure,  taking  into 
account  the  lifecycle  of  payment  terminals.  Yet,  quantitative  estimates  should  not  be 
considered as representatives owing to the very limited number of respondents and reported 
uncertainties  on  the  design  of  the  digital  euro,  whose  cost  will  also  depend  on  individual 
merchants’ profile.  

Professional  respondents  did  not  have  clear  views  as  to  whether  account  or  bearer 
based  solutions  might  entail  more  costs  for  merchants.  18  out  of  124  professional 
respondents  (15%)  were  of  the  view  that  costs  to  merchants  may  be  lower  in  case  of  an 
account-based  digital  euro,  owing  to  the  possibility  to  reuse  the  existing  payment 
infrastructures and processes in  spite of account and servicing fees, whereas a bearer-based 
digital euro might entail higher setup investments (e.g. installation of a hardware component). 
Conversely, 8 out of 124 professional respondents (6%) were of the view that those costs may 
be lower in the medium to long term in case of a bearer-based digital euro, especially in the 
domain of transaction processing. 15 out of 124 professional respondents (12%) considered 
that  there  was  broadly  no  difference,  pointing  to  similar  costs  or  a  balanced  distribution  of 
costs  between  an  account-based  or  a  bearer-based  digital  euro.  Other  professional 
respondents did not know (most of them highlighted major uncertainties on the design of the 
digital euro or asked for further explanation on the concepts of account-based vs bearer-based 
digital euros) or did not provide an answer. 

Professional  respondents  highlighted  several  options 
to 
counterbalance  one-off  costs  related  to  payment  terminals  or  software.  53  out  of  124 
professional  respondents  (43%)  were  of  the  view  that  merchants  should  be  given  the 
possibility  to  accept  other  private  payment  solutions  using  the  same  rather  than  new  POS 
terminals purchased for digital euro payments, also as a way to ensure a level playing field 
with private digital means of payment. A similar proportion of professional respondents (51 
out of 124 - 41%) also considered important that merchants should be given the possibility to 

to  allow  merchants 

114 

 
 
 
 
 
 
 
 
accept  digital  euro  payments  from  payers  using  a  variety  of  devices.  Respondents  often 
referred  to  QR  Codes  and  NFC  as  possible  cost-saving  solutions.  Possible  savings  on  the 
transaction  costs  of  digital  euro  payments  were  highly  valued  as  well  by  42  out  of  124 
professional  respondents  (35%).  Yet,  several  professional  respondents  –  mostly  credit 
institutions  and  payment  service  providers  –  challenged  the  possibility  to  lower  transaction 
costs  on  the  digital  euro  for  the  following  reasons:  i)  merchants  would  be  expected  to  pay 
fees  to  financial  institutions  for  setting  up  the  payment  infrastructure  and  processing 
transactions;  ii)  most  merchants  are  already  equipped  with  multi-solutions  POS  terminals. 
Merchants (e.g. Eurocommerce) were supportive of all these options, although they insisted 
on  the  need  to  put  in  place  standardised  interfaces  for  exchanging  transaction  data  across 
SEPA.  Additionally,  one  merchant  considered  that  a  digital  euro  bringing  EU  digital 
authentication may be used for different use cases and add extra-value to merchants.  

Merchant fees 

39 out of 124 professional respondents (32%) favoured applying boundaries to the fees 
charged  to  merchants  by  intermediaries,  whereas  38  out  of  124  respondents  (31%) 
preferred unregulated merchant fees. All merchants and merchant associations favoured a 
regulated  fee  structure,  referring  to  the  mandatory  acceptance  obligation  and  limited 
competition  in  the EU retail  payment  market.  On the other hand, PSPs and financial sector 
associations  opposed  boundaries  to  fees.  PSPs  highlighted  the  preference  for  a  competitive 
market  price  formation  and  referred  to  the  uncertainty  regarding  the  actual  costs  of  digital 
euro  payments  and  the  necessary  support  infrastructure,  which  could  result  in  distortionary 
effects if fees were to be regulated. They argued that since the digital euro represents a new 
form of currency but not necessarily a new payment system, the fees associated with payment 
acceptance should be set by market participants and depend on the costs incurred by PSPs as 
well  as  added-value  services  provided  by  them.  The  business  model  related  to  the 
introduction  of  the  digital  euro  should  be  market  driven,  transparent,  and  pricing  of  these 
services  should  be  competitive.  In  their  opinion,  price  regulation  would  stunt  innovation, 
create adverse incentive structures and decrease the strength of the digital euro compared to 
other  CBDCs  in  development.  PSPs  suggested  that  governments  may  consider  granting 
merchant subsidies to upgrade their hardware, to promote digital euro acceptance. Consumer 
associations called for a price regulation. In particular, it was stressed that if the access to the 
digital euro is done by existing PSPs, rules on fees are necessary, otherwise these institutions 
will use higher prices to favour their own electronic payment solution.  

As  regards  the  design  of  possible  merchant  fees,  60%  of  professional  respondents 
agreed  with  a  merchant  fee  based  on  real  costs  and  reasonable  margin  of  profit.228 
Interestingly, this  agreement was spread  across  respondents’ fields  of  activity, including all 
participating  merchants.  Credit  institutions,  payment  service  providers  and  financial  sector 
associations agreed furthermore overwhelmingly with the option of fees based on the volume 
or value of transactions  (insofar this has an impact  on the  real  costs of intermediation) and 
with the option of a fee structure that takes into account in the initial calibration multilateral 
interchange  fees  consistent  with  the  Interchange  Fee  Regulation.  Merchants  and  merchant 
organizations disagreed with all options but fees -based on real costs and a reasonable profit 

228 54 respondents (60%) strongly agreed or rather agreed with this option. The number of positive replies was lower for the other options, 
with 38 respondents (43%) replying positively to volume- or value-based fees, 30 respondents (33%) agreeing with taking into consideration 
multilateral interchange fees consistent with the Interchange Fee Regulation, and 11 respondents (19%) showing approval for alternative 
means of designing merchants fees.  

115 

 
 
 
                                                           
and in particular strongly disagreed that fees on digital euro payments could be based on the 
volume or value of transactions. In that context, one respondent argued that a volume-based 
fee would make already dominant large/global operators in e-payments even more dominant, 
and possibly lead to the prevention of any other form of competition. They stressed that full 
transparency  of  pricing  is  key  including  reviews  at  periodical  intervals.  While  many 
professional respondents acknowledged that the interchange fee model was well established 
and  accepted,  it  was  also  remarked  that  the  interchange  fee  regulation  was  designed  to 
respond to specific competitive issues in the card market and would not necessarily cater for 
the digital euro ecosystem.  

60  out  of  124  of  professional  respondents  (48%)  were  of  the  view  that  surcharges  on 
payment with the digital euro should be prohibited, including most merchants, pointing to 
a  variety  of  arguments  e.g.:  support  the  legal  tender  status  of  the  digital  euro,  extend  the 
scope  of  PSD2  provisions  on  surcharging,  protect  consumers  against  unreasonable  and 
hidden fees, foster digital euro attractiveness, ensure a level playing field with cash and other 
payment instruments. Conversely, 18 out of 124 professional respondents (15%) were of the 
opposite  view,  arguing  that  the  formation  of  prices  should  be  left  to  the  market  and  that 
competition would naturally prevent  high fees to  be  applied to  customers. Surcharges  were 
also seen by one professional respondent (Wordline) as a means to compensate for the higher 
operating costs of various specific use-cases or innovative services that may not necessarily 
reflected in the standard service price (e.g. P2P transactions).  

The legal tender status of euro cash 

Out  of  the  124  professional  respondents,  the  ones  which  answered  this  question 
expressed mixed views regarding legislative action at EU level to enhance legal certainty 
and  enshrine  the  legal tender  status  of  euro  cash  in  secondary  law, with  26  out  of  124 
professional  respondents  (21%)  supporting  EU  legislative  action  and  24  out  of  124 
professional  respondents  (19%)  of  the  opposite  view,  while  the  majority  of  professional 
respondents  did  not  have  any  view  on  that.  Consumer  organisations,  including  BEUC, 
appeared  to  strongly  support  EU  legislation  action  on  the  legal  tender  status  of  cash.  The 
supporters of legislative action, including several business associations (e.g. ESTA), consider 
that the legal status of cash needs to be clarified in the sense that cash has legal tender and 
has  to  be  universally  accepted,  and  that  the  current  situation  leaves  too  much  room  for 
interpretation  and  needs  a  more  strict  legal  frame.  One  argument  in  favour  brought  up  by 
several respondents is the need to have similar approaches for the digital euro and cash with 
respect  to  their  legal  tender  status.  Of  a  different  opinion  were  the  majority  of  responding 
financial institutions and merchants, which did not support legislative action and considered 
that the current legislative framework complemented with the CJEU case law is adequate. 

35 out of 124 professional  respondents (28%) considered that there  was no need for a 
further  definition  of  justified  exceptions  to  the  general  principle  of  mandatory 
acceptance,  grounded  on  reasons  related  to  the  good  faith  principle,  including  the 
responding merchants and the majority of responding financial institutions (e.g. the European 
Payments Council, the European Banking Federation)., which commented that the good faith 
principle is sufficient to ensure flexibility and freedom of choice. 18 out of 124 professional 
respondents (15%) were in favour of such justified exceptions, including most consumer 
organisations (e.g.  The Federation of German Consumer Organisations, BEUC) and several 
business associations (e.g. ESTA), which also consider that these exceptions have to be very 
well  specified  in  order  to  prevent  loopholes.  One  respondent  which  did  not  provide  a  clear 
choice (Cash Matters) mentioned the need to address the situations when merchants refuse to 
accept cash, the right to contractual freedom beating the right to pay cash. 

116 

 
 
Proposals  to  further  define  possible  exceptions  to  the  general  principle  of  mandatory 
acceptance  in  relation  to  the  legal  tender  of  cash  were  accordingly  received  with 
reservation.  In  general,  respondents  suggest  that  the  practical  considerations  should  be 
considered  when  allowing  exceptions,  and  that  proper  attention  should  be  given  so  that 
exceptions would not  create false incentives and invite moral  hazard with the outcome that 
merchants  could  easily  refuse  cash  payments.  Exceptions  related  to  (1)  the  situation  where 
retailers have no  change available  received no support  from  most professional  respondents, 
including  consumer  organisations,  financial  institutions  and  merchants.  Most  professional 
respondents also did not support exceptions related to the case where (2) there would be not 
enough change available as a result of that payment for a retailer to carry out its normal daily 
business transactions, but in this case the views of the financial institutions and merchants are 
balanced.  Exceptions  related  to  (3)  the  situation  where  no  party  shall  be  obliged  to  accept 
more  than  50  coins  in  any  single  payment  (except  for  the  issuing  authority  and  for  those 
persons specifically designated by the national legislation of the issuing Member State) or (4) 
if the value of the banknote tendered is disproportionate compared to the value of the amount 
to be settled were backed by consumer organisations, with merchants having balanced views 
related to the latter exception.. There were mixed views regarding the exception related to (5) 
a refusal in case of security reasons among professional respondents although one consumer 
organisation showed opposition to it. 

41  out  of  124  professional  respondents  (33%),  including  the  majority  of  responding 
financial  institutions  and  merchants,  are  not  in  favour  of  additional  exceptions  to  the 
mandatory acceptance principle proposed by Member States and subject to approval by 
the  European  Commission  after  consulting  the  ECB,  one  of  the  arguments  being  the 
resulting  potential  fragmentation  within  the  EU.  22  out  of  124  professional  respondents 
(18%) were in favour of such additional exceptions (e.g. ESTA, the Asociación Española 
de  Banca,  the  International  Currency  Association),  based  on  duly  justified  exceptional  and 
overarching reasons related to public policy. Consumer organisations presented mixed views. 
It  is  likely  that  the  scope  of  the  possible  provision  which  was  the  subject  of  this  question, 
which would be restricted to specific measures of a monetary law nature and would not cover 
exceptions in areas of national or shared competence, was misunderstood. 

Professional  respondents  appeared  to  have  mixed  views  regarding  the  provision  of 
administrative sanctions for cash non-acceptance. 35 out of 124 professional respondents 
(28%),  including  the  majority  of  the  responding  financial  institutions  and  all  responding 
merchants (e.g. EuroCommerce), declared that they did not support such a provision, one of 
the opinions being that there should be no need for administrative sanctions when payments 
are based on the freedom to contract.32 out of 124 professional respondents (26%), including 
all responding consumer organisations (e.g. BEUC),  supported this provision and generally 
considered that administrative sanctions will contribute to the enforcement of the principle of 
mandatory acceptance of cash. One respondent (Cash Matters) considered that the legislation 
for cash acceptance could be ignored by retailers in the absence of sanctions. 

Overall and in each relevant stakeholder group, most professional respondents (54 out 
of  124,  44%)  supported  to  confirm  the  prohibition  on  surcharges  on  payments  with 
euro banknotes and coins in case of a EU regulation, with the main argument being that 
the existence of such surcharges would contradict the legal tender status of cash (namely the 
acceptance of cash at face value). Only 13 out of 124 professional respondents (10%) did 
not support this. 

Overall  and  in  each  relevant  stakeholder  group  except  financial  institutions,  most 
professional respondents (49 out of 124, 40%, including the wide majority of responding 

117 

 
 
merchants) also supported a provision to guarantee the availability of cash,  such as an 
obligation  on  Member  States  to  adopt  rules  to  ensure  sufficient  access  to  cash  and 
report  these  rules  to  the  Commission  and  the  ECB,  in  case  of  a  EU  regulation.  These 
respondents considered that adequate availability of cash should be maintained especially for 
the people who use only cash for payments, and that merchants should not be legally obliged 
to issue cash to citizens (no default cash back obligation). One business association (ESTA) 
had a more practical approach, saying that cash is a volume driven activity and it will become 
unsustainable once a critical mass of cash is circulation will no longer be secured. 21 out of 
124  professional  respondents  (17%),  including  the  majority  of  responding  financial 
institutions, did  not  support  the  suggested  provision.  In  general,  their  views  are  that  the 
access to cash should be the responsibility of the Member States. 

4. The digital euro’s impact on the financial sector and the financial stability  

Answers  to  the  targeted  consultation  pointed  to  mixed  views  regarding  the  potential 
impacts  a  digital  euro  may  have  on  the  business  of  financial  intermediaries.  Credit 
institutions reported many positive impacts such as the deployment of innovative services to 
consumers,  leveraging  the  existing  or  upgraded  banking  and  payment  infrastructure  and 
processes.  On  the  other  side,  they  pointed  to  strong  disintermediation  risks,  endangering 
financial  stability  and  the  economic  growth  through  lending  channels.  Several  respondents 
also  highlighted  risks  of  an  eviction  of  private  payment  solutions  and  lower  innovation. 
Other  payment  services  providers  mostly  insisted  as  well  on  the  opportunity  to  develop 
innovative  services  and  the  increase  in  competition  due  to  the  adoption  of  a  new  payment 
method, while acknowledging that a digital euro may lead to an eviction of private payment 
solutions  and  lower  innovation.  Crypto-assets  service  providers  considered  that  a  digital 
euro may foster the deployment of innovative services and the adoption of crypto-assets by 
end-users.  However,  it  could  also  reduce  the  attractiveness  of  crypto-assets  as  a  payment 
instrument in cross-border transactions.  

53 out of 124 professional respondents (43%), mostly financial institutions and to a lesser 
extent payment  services  providers and market  infrastructures,  considered that limiting the 
store  of  value  function  of  the  digital  euro  by  introducing  holding  caps,  limitations  to 
transactions,  or  different  interest  and/or  fees  disincentives  on  large holdings  would be 
rather or very important for financial stability purposes, in order to prevent bank runs 
in crisis situations or to prevent structural disintermediation of financial intermediaries. 
The overwhelming majority of PSPs  (15 out  of  21 who replied 71%) and about  half of the 
merchants found important to limit the store of value function of the digital euro. Around a 
third  of  the  banks  that  supported  limiting  the  store  of  value  function  of  the  digital  euro 
stressed at the same time that maintaining limits could face difficulties in the long term owing 
to  social  and  political  pressure.  21  out  of  124  professional  respondents  (17%)  did  not 
consider  important  to  limit  the  store  of  value  function  of  the  digital  euro  or  expressed 
opposition  to  it.  7  (6%)  were  neutral  and  43  (35%)  did  not  reply  A  few  professional 
respondents,  both  banks  and  non-banks,  expressed  themselves  against  the  introduction  of 
limits, and some proposed that the ECB rather intervenes in support of banks. Around a tenth 
of  the  professional  respondents,  mostly  banks,  expressed  themselves  openly  against  the 
introduction of interest on digital euro. Interestingly, some banks supported the introduction 
of negative rates only. About 20 citizens (11%) supported and 62 (33%) opposed limiting the 
holdings of digital euro (100 (54%) did not answer and 7 (4%) were neutral). 

Professional respondents mostly did not consider that holding limits or disincentives to 
the store of value function would affect the usability of the digital euro, even if the risk 
was  assessed  differently  depending  on  the  type  of  payment  concerned,  with  P2P  and 

118 

 
 
M2M  payments  assessed  as  potentially  the  least  affected  and  B2B  payments  the  most 
affected.  Some  of  them  were  of  the  view  that  the  usability  of  the  digital  euro  would  be 
slightly or largely unaffected for M2M (31 out of 124 professional respondents, 25%) or P2P 
(49  out  of  professional  124  respondents,  40%)  payments.  On  the  contrary,  around  45%  of 
professional respondents (56 out of 124) considered that B2B payments would be slightly or 
largely  affected  whereas  around  40%  that  considered  that  holding  limits  or  disincentives 
would slightly or significantly increase its usability in B2B payments as well.  PSPs were of 
the view that limits would affect more B2B payments than P2B or P2P payments. Merchants 
were more worried that limits could reduce the digital euro’s usability in P2B payments than 
in  the others.  Overall, professional  respondents  identified the impairment of limits  with  the 
impossibility of carrying over large payments, referring on the contrary to the low value of 
average daily payments by individuals (less than 100€ in the euro area). Positive aspects of 
introducing  holding  limits  were,  in  particular,  stressed  by  banks,  which  for  instance 
considered that holding limits were easy to understand and would help users to control their 
spending.  Yet,  more  than  half  of  financial  institutions  assessed  that  holding  limits  or 
disincentives  would  affect  the  digital  euro.  Banks  reiterated  their  opposition  to  interest 
remuneration,  especially  with  different  tiers,  as  this  would  be  confusing  and  disincentivise 
broad  adoption.  Arguments  against  the  introduction  of  holding  limits  brought  by  several 
respondents,  also  outside  the  financial  sector,  were  that  they  limited  the  usefulness  of  the 
digital  euro  as  a  digital  payment  instrument,  putting  the  digital  euro  at  a  competitive 
disadvantage with stablecoins.  

Many  professional  respondents,  banks  in  particular,  were  in  favour  of  introducing  a 
waterfall mechanism, whereby payments would be paid on a commercial bank account 
for the amount above the holding limit. 

42  out  of  124  professional  respondents  (34%)  considered  that  a  digital  euro  without 
limits or disincentives would have a negative impact on the volume of retail deposits, 39 
out of 124 professional respondents saw an increased risk of a bank run (31%) and 38, 
mostly  financial  institutions,  considered  that  there  would  be  a  negative  impact  on 
banks’ net interest income and revenues from fees  (31%). 29 out of 124 of professional 
respondents (23%) considered that a digital euro without limits or disincentives would have a 
negative  impact  on  credit  provision  in  the  economy.  Only  15  out  of  124  the  professional 
respondent (12%) considered that the ability to comply with AML/CFT and other obligations 
would be affected negatively. Some respondents cautioned in particular against the possibility 
of a loss of deposits or unfair competition with the private sector payment solutions. 

In  the  scenario  of  a  successful  stablecoin  used  as  a  payment  tool,  credit  institutions 
considered that the non-issuance of a digital euro could have disruptive effects on their 
business model as well as on monetary policy, financial stability, competition and economic 
growth. Nevertheless, the exact nature and level of impacts might depend on several factors 
related  to  the  design  of  the  stablecoin  (e.g.  issuing  entity,  currency,  backing  assets, 
interoperability  between  systems,  transaction  costs  convenience,  programmability).  Most 
credit  institutions  advocated  for  a  proper  regulation  of  stablecoins  (e.g.  issuance  limited  to 
credit  institutions,  issuance  limitations,  prohibition  of  foreign  stablecoins  used  as  payment 
instruments).  A  few  banking  and  non-banking  respondents  underlined  that  a  digital  euro 
without limits would have similar harmful impacts than a stablecoin, or that a stablecoin bore 
no risk, or also that the impact on credit institutions was unclear. 

A high share of professional respondents saw a strong role for financial intermediaries 
in  the  digital  euro  distribution.  Intermediaries’  experience  in  KYC  and  AML  checks  had 
the highest share of positive ratings (72%, 76 out of 124 respondents), the use of existing IT 

119 

 
 
systems  for  customer,  front  and  back  office  services  the  lowest  (64%,  68  out  of  124 
respondents).  Other  areas 
included  consumer  protection  (fraud,  disputes,  refunds, 
chargebacks  or  data  misuse),  cybersecurity  support,  and  synergies  with  commercial  bank 
account (funding/defunding). Many professional respondents saw a role for banks, payment 
institutions and other entities along the lines of the functions they fulfil today for commercial 
bank money (i.e. settlement agent, processor of payments, distributor of means of payment, 
and maintaining customers’ balances). Credit institutions and payment service providers saw 
the  most  potential  for  intermediaries’  services  in  the  digital  euro  distribution.  They 
highlighted  in  particular  the  synergies  between  a  robust  and  flexible  core  infrastructure 
developed  by  the  ECB  and  private  solutions  that  can  use  existing  knowledge  and 
infrastructures and might provide added services on top. Market incentives would also ensure 
that value-added functionalities evolve along with users' demands. It was also mentioned (e.g. 
by PayPal, Meta) that the distribution of digital euro and the ability to provide services should 
not be limited to regulated banks but should also be open to regulated non-bank PSPs. Lastly, 
surveyed  merchants  and  merchant  organisations  strongly  favour  a  cost  model  where  basic 
digital  euro  services  are  at  close  to  zero  cost  of  acceptance  and  additional  services  are 
optional and not mandatory. 

44 out of 124 professional respondents (35%) anticipated a significant increase in one-
off costs whereas 14 (11%) anticipated a similar trend for recurrent costs. Costs incurred 
by  the  introduction  of  a  digital  euro  mostly  relate  to  the  deployment  of  new  distribution 
channels,  IT  connections  to  the  ECB  and  legacy  systems,  account  management,  customer 
support, scheme and transaction fees, transaction processing, KYC/AML, fraud management, 
payment  guarantee,  accounting,  back-office,  training,  marketing,  as  well  as  the  ability  to 
provide  non-free  services.  Most  professional  respondents  pointed  out  to  difficulties  in 
estimating future costs owing to large uncertainties on the design of the digital euro and the 
possibility  to  reuse  existing  banking  and  payment  infrastructures.  Several  professional 
respondents  advocated  for  a  clear  change  management  framework  (e.g.  early  planning  of 
evolutions  regarding  the  design  of  the  digital  euro),  on  the  model  of  Target  2  or  SEPA 
schemes, in order to better anticipate evolutions and future costs. 

The  additional  services  financial  institutions  could  potentially  offer  to  customers  in 
relation  to  the  digital  euro  mostly  relate  to  payment  services  e.g.  splitting  transactions 
among  friends/family.  Professional  respondents  also  quoted  –  although  to  a  lesser  extent  – 
other  types  of  services  such  as  account  management  services  e.g.  overview  of  accounts, 
regulatory services e.g. dispute resolutions, and lending services e.g. instalments. Ultimately, 
the  capacity  of  financial  institutions  to  provide  additional  services  would  depend  on  the 
underlying  infrastructure  and  technology,  the  design  and  ecosystem  of  the  digital  euro,  the 
interoperability of digital euro solutions, as well as the access to personal data. 

5.  Application  of  anti-money  laundering  and  counter  terrorist  financing  (AML-CFT) 
rules 

Overall,  professional  respondents229  were  of  the  view  that  a  bearer-based  digital  euro 
would lead to an increase of AML/CFT compliance costs, while an account-based digital 
euro would comparatively be the least costly solution in terms of AML/CFT compliance. The 

229 For the purposes of this section, respondents were limited to business companies, firms and public authorities. 

120 

 
 
 
                                                           
abstention  rate  was  high,  which  indicates  that  many  respondents  are  unsure  of  future 
compliance costs (abstention rate for these questions is on average 52%). 

A bearer-based digital euro available offline was considered a costly solution as 31 out of 
124 professional respondents (25%) considered it would lead to a high or very high increase 
in  AML/CFT  compliance  costs.    On  the  other  hand,  an  account-based  digital  euro  was 
considered  the  least  costly  solution,  with  31  out  of  124  professional  respondents  signalling 
that it would lead to no increase or a small increase in AML/CFT costs (25%). An additional 
18  professional  respondents  out  of  124  (15%)  suggested  and  account-based  digital  euro 
would lead to only a ‘regular’ increase in AML/CFT compliance costs. 

Asked  about  the  specific  challenges  a  digital  euro  would  pose  for  AML/CFT  compliance, 
many professional respondents answered that it would depend on the specific design adopted 
for  the  digital  euro.  While  a  minority  answered  that  they  saw  no  impact  on  AML/CTF 
compliance by the implementation of a digital euro, most professional respondents feared that 
a  too  anonymous/pseudonymous  design  would  challenge  the  combat  of  money  laundering. 
Therefore, they demanded that payment processors should retain access  to transaction data. 
Two professional respondents referred to the current SEPA Request to Pay Scheme (SRTP) 
as a data sharing system that could be harvested in an equivalent manner for the digital euro. 
Only  9  out  of  124  professional  respondents  (7%)  suggested  that  the  current  AML/CFT 
regulations for cash would also be applied for the digital euro.  

Most professional respondents warned that offline functionality could, dependent on the 
design, be considered high risk for AML/CTF purposes. Hence, they were of the view 
that limits should be imposed  (e.g. a maximum  amount of offline transactions per person 
and  timeframe  or  a  maximum  accumulated  value).  Some  also  said  that  for  the  low-value 
transactions, intermediaries should be exempted from AML/CTF responsibilities.  

Professional  respondents  had  varying  views  on  whether  low-value  offline  digital  euro 
transactions  would  represent  equal  or  less  ML/TF  risks  relative  to  other  means  of 
payment  (cash,  online  commercial  bank  money,  and  an  online  digital  euro).  41  out  of  124 
professional respondents (33%) believed that low-value offline digital euro transactions had 
equal or less risks than online digital euro payments; 65 out of 124 professional respondents 
(52%) believed that the ML/TF risk would be as the same as cash’s. Only a minority of 31 
out  of  124  professional  respondents  (25%)  thought  that  the  risks  of  offline  functionalities 
would be equal or less than the one of online payments in commercial bank money. 

6. The privacy and data protection aspects  

Around  half  of  respondents,  including  EU  citizens,  supported  features  that  enhance 
user’s privacy and grant the user a high level of data protection: 

  152  out  of  312  respondents  (49%)  considered  appropriate  the  ability  to  mask  the 

identity of the payer or the payee to each other (‘peer-to-peer pseudonymity’); 

  142 out of 312 respondents (46%) believed appropriate the ability to mask the identity 
of  the  payer  or  the  payee  to  the  other  party’s  intermediary  (‘intermediary-to-
intermediary pseudonymity’); 

  153  out  of  312  respondents  (49%)  were  of  the  view  that  the  ability  to  limit  the 
knowledge on the identity of the payer or the payee to the central bank, and/or other 
third party intermediaries not involved in the transaction, was appropriate; 

121 

 
 
 
 
 
  144 out of 312 respondents (46%) supported the ability to completely hide the identity 

of the payer and payee for low-value offline transactions. 

EU citizens are in favour of all features that enhance user privacy – with the ability to hide 
the identity of a payer and payee for low-value transactions proving the most popular 
feature - 81 respondents among EU citizens (43%) believed that a high level of privacy for 
low value transactions is either very appropriate or rather appropriate.  

106 out of 312 respondents (34%) believed that users of a digital euro should have the 
possibility  to  ‘opt-in’  to  additional  data-driven  services.  However,  a  sizeable  minority, 
96  out  of  312  respondents  (31%),  believed  that  this  should  not  be  the  case,  suggesting 
that  opinions  on  data-driven  services  should  be  assessed  on  a  case-by-case  basis  and  are 
dependent on which specific innovative services being considered. 

The  right  to  process  personal  data  for  a  number  of  potential  activities  was  highly 
contested between citizens on the one hand, and other professional respondents on the 
other hand. 

  72 out of 124 professional respondents (60%) mostly believed that the processing of 
personal  data  is  very  or  rather  appropriate  for  the  fight  against  money  laundering, 
organised  crime  and  terrorism,  compared  to  35  out  of  188  EU  citizens  respondents 
(19%). 

  43  out  of  124  professional  respondents  (35%)  favoured  the  processing  of  personal 
data for the enforcement of tax rules. On the other side, only 23 out of 188 EU citizen 
respondents  (12%)  deemed  this  appropriate  for  this  purpose  while  53  out  of  188 
respondents (28%) thought it not at all appropriate. 

  49  out  of  124  professional  respondents  (40%)  also  believed  that  personal  data 
processing was very or rather appropriate for payment settlement purposes, while only 
22 out of 188 of the EU citizen respondents (12%) believed the same; 52 out of 188 
(28%) however thought it not at all appropriate. 

  55 out of 124 professional respondents (44%,) thought the processing of personal data 
for  the  management  of  operational  security  risks  appropriate.  Only  24  out  of  188 
respondents of EU citizen respondents believed the same (13%). 

  46  out  of  124  professional  respondents  (37%)  believed  that  processing  of  personal 
data  would  be  rather  or  very  appropriate  to  enforce  potential  holding  limits.  This 
belief was shared by 12 out of 188 EU citizen respondents (6%), while 32% think it 
rather not or not at all appropriate.  

  Only on the issue of whether processing of personal data is appropriate for additional 
innovative  online  services  and  functionalities  both  groups  seemed  to  agree  at  least 
somewhat. Only 33 out of 124 professional respondents (27%) and 20 out of 188 EU 
citizens and consumer organisations (11%) thought the processing of personal data for 
this reason rather or very appropriate. 

Respondents did not believe central banks should be able to access personal data.  

  153 out  of 312 respondents  (49%) believed that  central  banks should not be able to 
process personal data for the purposes of payment settlements. (Compared to only 34 
respondents (11%) in favour.) 

122 

 
 
 
 
 
 
 
 
  149 out of 312 respondents (48%) were of the view that central banks should not be 
able to process personal data for the purposes of operational resilience. (Compared to 
only 43 respondents (14%) in favour.) 

  119 out  of 312 respondents  (38%) believed that  central  banks should not be able to 
process  personal  data  for  the  purposes  of  AML/CFT  compliance.  (Compared  to  71 
respondents (23%) in favour.) 

  118 out of 312 respondents (38%) of respondents believed that central banks should 
not  be  able  to  process  personal  data  to  combat  fraud.  (Compared  to  75  respondents 
(24%) in favour.) 

While professional respondents (including PSPs) did not believe central banks should be able 
to  access  data  for  the  purposes  of  payment  settlements  or  operational  resilience,  a  small 
majority  believed  central  banks  should  be  able  to  process  personal  data  for  AML/CFT 
purposes  (38%,  47  out  of  124  respondents)  and  to  combat  fraud  (39%,  48  out  of  124 
respondents). 

7. International payments with a digital euro 

Both  citizens  (54  out  of  188,  28%)  and  professional  respondents  (94  out  of  124  found, 
76%) were mostly supportive of a digital euro available only for euro area citizens and 
for intra euro area transactions. 47 citizens (25%) and only 1 professional were against. 85 
citizens  (45%)  and  26  professional  (21%)  did  not  reply.  49  out  of  188  EU  citizens  (26%) 
supported that tourist visiting the euro area should also be able to pay with a digital euro  and 
28 (14%) were against (86 (45%) did not reply. The same question received support from 75 
professionals (60%) and 31 (25%) did not reply. 

The potential use of the digital euro outside the euro area attracted less support. 49 out 
of  188  EU  citizens  found  that  international  use  would  be  very  desirable  or  rather  desirable 
(26%). About 39-42  citizens  (21-22%) were  against the use of a digital  euro outside of the 
euro area and  85  (45%)  did  not  reply. Transactions with  selected third  country  residents  or 
businesses was supported by 53 out of 124 professional respondents (43%), against 14% that 
opposed  it  (41  did  not  reply  (33%)).  Furthermore,  49  out  of  124  (40%)  professional 
respondents  found  unlimited  transactions  with  third  countries  desirable,  against  21%  that 
opposed  it.  (37  did  not  reply  (30%))  A  respondent  commented  that  companies  based  in 
Europe (SMEs, corporates and large corporates) should be able to use the digital euro for the 
settlement  of  commercial  transactions  with  the  possibility  of  offering  value-added  services 
thanks to its programmability (i.e., smart contracts). It was also suggested that beyond euro 
area residents, a digital euro should be available for any person physically present on the euro 
area  territory  independently  of  its  situation  including  migrants,  asylum  seekers  or  refugees. 
PSPs suggested that the use of the digital euro in the international context should be assessed 
by  considering  the  existing  and  developing  private  sector  standards  and  solutions  (e.g. 
ISO20022,  SWIFTgpi)  that  allow  efficient  payments  across  borders  in  commercial  bank 
money.  

Banks and their associations emphasised the potential of a wholesale CBDC as opposed 
to a retail CBDC. For trading purposes, a wholesale digital currency suited for large value 
cross-currency payments would be better suited than a retail focused digital euro. Finally, it 
was stressed that the ECB should take part in the development of global standards in order to 
avoid  that  the  initial  design  decisions  hinder  a  potential  future  interoperability  of  a  digital 
euro with other CBDCs. Interoperability could support remittances and trade. 

123 

 
 
 
 
Some respondents stressed the risks to financial stability in non-euro area countries. 19 
out  of  124  professional  respondents  (15%)  believed  that  unfavourable  capital  movements 
would  be  the  most  significant  impact  on  non-euro  area  countries,  followed  by  monetary 
autonomy  (17  out  of  124  professional  respondents,  14%),  financial  stability  (14  out  of  124 
professional respondents, 11%). Only 11 out of 124 professional respondents (9%) assessed 
the risk of financial disintermediation as significant. Professional respondents also added that 
money laundering would also be an issue in international transactions. In the opinion of some 
of the banks and banking associations, stronger currencies could take over in countries with 
weaker  economies.  From  this  perspective,  an  extensive  use  of the  digital  euro  in  non-euro-
area  Member  States  could  affect  their  economies  and  monetary  systems  and  may  lead  to 
disintermediation especially in crisis situation. Therefore it was suggested to limit the usage 
of the digital euro outside the euro area e.g., through limits or a limitation of eligible holders. 
In the opinion of a non-euro area central bank, conditional on the final design of the digital 
euro, easy access to digital euro for retail and wholesale users outside the Euro area could be 
detrimental for the local financial system and the conduct of the sovereign monetary policy, 
especially  in  crises.  Therefore,  this  respondent  proposed  to  open  this  possibility  only  for 
transactions related to tourism or other short-term transactions, and design the accessibility of 
digital  euro  for  cross-border  use  within  the  EU  with  far  more  restriction  e.g.  in  terms  of 
remuneration,  account  balance  and  possible  maturity  of  holdings,  or  potentially  limiting  its 
use primarily to euro area residents. 

Respondents overall supported a staggered approach. Due to unforeseeable risks, it was 
advised  that  the  digital  euro  project  focused  on  a  first  phase  exclusively  on  citizens  of  the 
euro  area  and  when  a  stable  regime  of  widespread  use  has  been  attained,  study  potential 
expansion  to  other  sets  of  users  if  necessary.  Issuing  CBDC  for  non-euro-area  residents 
would  raise  operational  issues  such  as  onboarding  of  non-residents,  fraud  and  AML/CFT, 
servicing or closing of the wallet.  

The chart above shows the aggregated replies of both people and professional respondents. 

124 

 
 
 
 
IV.  Results of the call for evidence on the digital euro  

Introduction 

On 5 April 2022, the European Commission  launched a call for evidence  on a digital  euro. 
The campaign for collecting answers closed on 16 June 2022.  

The purpose of the call for evidence is to complement the European Commission’s targeted 
consultation  on  a  digital  euro  with  further  information  gathered  from  all  categories  of 
stakeholders on any topic related to the digital euro. 

The European Commission received 19.258 comments.  

Overview of respondents and responses 

By  far,  most  comments  came  from  EU  citizens,  with  the  largest  groups  of  the  respondents 
belonging to Germany and Slovakia. 

Summary of respondents’ feedback 

Respondents’  feedback  was  mostly  negative  but  this  result  is  not  representative  and 
likely significantly biased.   

The  concentrated  participation  and  the  results  may  hint  to  a  very  large  bias  among  the 
respondents, whereby those people who saw the digital euro as a threat, took the opportunity 
to answer the call for evidence, while people with positive, neutral or no opinion might not 
have  made  time  and  effort  to  contribute.  It  cannot  be  excluded  that  organized  crowd 
contributions, so called campaigns, could have also contributed to the large number of biased, 
negative  responses  especially  from  the  Member  States  with  the  two  largest  number  of 
respondents (Germany and Slovakia). 

In this context, and considering the absence of sampling, responses cannot be considered as 
representative  to  the  EU’s  population.  They  are  nevertheless  useful  to  explore  to  better 
understand people’s reaction about the digital euro. 

Based  on  a  random  sample  of  about  900  responses,  positive  comments  came  from 
professional respondents (banks, economic organisations) for one half and EU citizens for the 
other  half.  Those  positive  comments  mostly  stressed  the  safety  and  efficacy  of  a  digital 
currency. Most respondents nevertheless voiced concerns about the digital euro.  

125 

 
 
 
 
 
 
 
Here we present the most typical opinions voiced by people: 

Concerns voiced

2%2%2%

3%

4%

31%

5%

7%

10%

13%

21%

stronger central regulation
abolition of cash
less privacy
technical problems
cyber-attacks
no need
threat to free market economy and to the stability of the financial system
distrust of EU-institutions
higher value fluctuation
exclusion of certain people

1.  The digital euro would lead to stronger centralised control over the people. 

The argument voiced most often was that the introduction of the digital euro would give the 
EU  or  the  ECB  central  control  over  the  users.  Respondents  feared  that  all  their  monetary 
transactions using the digital euro would be traceable. 

Many were afraid that with the introduction of the digital euro EU citizens could  be scored 
and the accounts of certain users blocked. 

A  corresponding  argument  was  the  reduction  in  privacy  stemming  from  the  use  of  digital 
payment  methods.  The  predominant  fear  concerned  governmental/EU  control,  while  only 
very few comments also mentioned control by private businesses, in particular, measures to 
counter the risk of money laundering that would need to be taken into account in the digital 
euro  design,  considerations  that  digital  euro  are  construed  into  the  surveillance  of  all 
monetary transactions. 

This  argument  was often supported by  general  mistrust in  EU or governmental  institutions. 
Some  comments  from  central  European  Member  States,  especially  from  Slovakia,  Czech 
Republic  and  Poland,  stated  a  general  distrust  in  official  institutions.  Other  comments, 
especially from Germany and Austria, linked the digital euro to a step towards high control. 

126 

 
 
 
 
 
2.  The digital euro would lead to the abolition of cash. 

Almost all commentators directly or indirectly assumed that the digital euro would substitute 
cash as the only legal tender. Abolition of cash was universally rejected.  

Even those rare commentators, who understood that the digital euro would be implemented in 
addition to cash, assumed that this was only an asserted argument, while according to them 
the envisaged plan was to slowly replace cash  until  the digital  euro becomes the only used 
currency. They were of the view that a growing number of businesses would require digital 
payment methods. 

Many reasons were stated for keeping cash. Most importantly cash payments were considered 
anonymous compared to electronic payment methods. The physical form appeared for these 
respondents  to  give  a  real  substance  to  money,  while  digital  or  electronic  money  was 
considered too abstract to have the same value. Some people feared to be cheated out of their 
wages, if they were paid in digital euros. Many people, especially from Germany, emphasised 
the  better  control  over  their  own  expenses  when  paying  in  cash  instead  of  digital  payment 
methods.  Also,  people  argued  that  the  digital  euro  would  hinder  certain  transaction  types, 
such as monetary presents  of grandparents  to  grandchildren, donations to homeless  persons 
on the streets, tipping of waiting staff in restaurants, paying at flea markets, farmers markets 
or other small-scale consumer to consumer or consumer to small business transactions. 

Some supported this argument with the fear that certain groups of people would be excluded 
by  the  requirement  of  using  digital  money.  Those  would  be  especially  elderly  persons, 
children, homeless, persons with disability, poor people. 

Many people also voiced their unease that a digital currency would make them dependent of 
technology, such as smartphones, while cash payments were more direct. 

An  often-stated  fear  was  that  the  digital  euro  would  be  vulnerable  to  technical  problems. 
Especially, it would not be usable during power outages or when there is no connection to the 
internet  available.  Some  were  even  afraid  to  lose  their  entire  digital  credit  if  there  is  a 
blackout. 

A  perceived  danger  were  also  cyber-attacks  on  the  ECB,  the  digital  euro  system  or  the 
individual accounts. 

3.  There would be a higher fluctuation of value. 

A  few  people  feared  that  the  value  of  the  digital  euro  would  have  a  higher  fluctuation, 
making it difficult to use. These people were split in two groups. 

The bigger group believed that the introduction of digital currency would make it easier for 
the ECB to devalue the euro leading to a higher inflation rate. Many of those people favoured 
to base the currency on gold reserves. 

The  smaller  group  thought  that  the  digital  euro  would  behave  like  Bitcoin,  the  value 
depending  on  the  trust  in  the  currency.  Since  they  themselves  mostly  would  not  trust  the 
digital euro they also feared a loss of value in this way. 

Connected to the worry of inflation some believed the introduction of digital currency could 
threaten the free-market economy and the stability of the financial system. 

127 

 
 
4.  There is no need for the digital euro. 

Another  often  voiced  opinion  is  that  there  was  no  need  for  the  digital  euro.  Those  people 
were  content  with  the  online  banking  and  card  payment  options  already  available.  They 
believed the digital euro would just be an attempt of the EU to monitor cash flows through 
government institutions instead of letting them choose their own private bank. 

5.  Climate crisis 

Because  a  digital  currency  was  dependent  on  electricity,  a  few  argued  that  the 
implementation  would  be  irresponsible  in  view  of  the  climate  change.  Some  of  them  also 
drew  a  connection  to  the  gas  and  oil  shortage  due  to  the  war  in  Ukraine,  arguing  that  no 
energy could be spent on a digital currency. 

6.  Other reasons 

A lot of people claimed that the introduction of a digital currency would violate their freedom 
and human rights without substantiating this point. Some commentators believed the use of 
the digital euro would stand in contradiction to their religion. 

128 

 
 
 
 
 
Annex 3 - Who is affected and how? 

1.  PRACTICAL IMPLICATIONS OF THE INITIATIVE 

The objective of this Annex is to summarise how the combination of options 1c, 1e/f, 2c, 2d, 
3b, and 4c (assessed as preferred option) addresses the identified problem and to set out the 
practical implications for the main stakeholders affected by this initiative. The initiative aims 
to address the problem described in Chapter 2, namely that physical central bank/ECB money 
is not sufficient in the digital age and thus the objective of the initiative is to ensure that the 
central  bank money issued by the  Eurosystem can  support the EU’s  economy in  the digital 
age by also meeting digital payment needs in parallel with the use of cash. In doing so, the 
preferred option would, in relation to the digital euro: 

  provide legal tender status with an obligation for all payees to accept it, with justified 
and  proportional  exceptions  (Option  1c)  and  adequate  distribution  arrangements 
(1e/f), 

  provide  for  a  high  level  of  privacy  for  low  value  offline  payments  by  processing 
personal  data  related  to  users’  identity  but  not  transactions  data,  unlike  for  online 
payments  where  both  personal  and  transaction  data  are  processed  in  line  with 
AML/CFT requirements (Option 2c, 2d), 
the  Eurosystem  to  reduce  the  risk  to  financial  disintermediation  and  stability  by 
applying tools to limit its store of value function (Option 3b), 

 

  make it at first available for residents/businesses of the euro area and visitors (Option 
4c), but possibly expand it at a later stage for transactions with non-euro area Member 
States and third countries (Option 4b). 

The costs of the initiative are, on the one hand, one-off implementation costs, which fall on 
the Eurosystem, merchants and PSPs. The Eurosystem would have to invest in setting up the 
digital  euro  scheme  (both  online  and  offline),  including  the  network  and  settlement 
infrastructure. PSPs’ one-off costs include adapting front-end systems (apps, online banking, 
ATMs),  back-end  systems  (including  both  the  payer  and  payee  (acquiring)  side  and 
integration  with  settlement  and  account  management  systems),  and  adapting  AML/KYC, 
anti-fraud,  accounting  and  other  business  processes.  Merchants  would  have  to  pay  the 
hardware  and  software  costs  of  making  their  terminals  capable  of  accepting  digital  euro 
payments as well. However, there would be an exception for some categories of merchants (it 
being understood that merchants accepting other electronic means of payment would in any 
event  have  to  accept  digital  euro  payments)  in  line  with  the  provisions  of  Option  1c,  for 
whom the individual adaptation costs would anyway be relatively higher. There might be also 
some  learning  costs  for  consumers,  similarly  to  the  learning  costs  associated  with  online 
banking or new apps, but the technical solutions necessary to transact would be provided to 
them free of charge.  

The initiative would also trigger operating (recurrent)  costs.  The Eurosystem  is  expected to 
incur  costs  in  relation  to  e.g.  running  the  digital  euro  scheme,  marketing  the  initiative, 
educating  consumers  and  merchants,  and  operating  the  IT  back-end  infrastructure.  PSPs  in 
particular would have to bear the costs of their operation, including customer onboarding and 
support, and pay the fees for the communication network, AML/CFT and fraud checks, and 

129 

 
 
transaction management. Merchants in particular would have to pay the transaction fees and 
the annual maintenance and license fees of their POS terminals. However, it is reasonable to 
assume  that  they  will  not  be  higher  than  the  fees/costs  of  existing  payment  means  (mostly 
cash and debit cards). The other users, businesses and consumers could use the digital euro 
basic services for free and pay fees for additional services. 

In terms of benefits, consumers would have more choice in their payment decisions and can 
chose  to  use  central  bank  money  in  their  everyday  digital  payments.  Merchants  might  also 
enjoy the increased choice and competition on the pan European payment market especially 
when negotiating with private payment providers. 

It cannot be excluded that the digital euro, if being less costly and more efficient, could take 
over a share of the existing payment business currently intermediated by PSPs. If the digital 
euro  were  indeed  to  reduce  the  resources  needed  for  performing  payment  services  required 
for  a  given  level  of  economic  activity,  replacing  them  would  be  an  overall  benefit  for  the 
society as a whole. Over time, this might more than compensate the one-off implementation 
costs, which may be limited. In addition, PSPs would have the possibility of innovating and 
introducing  value  added  services  on  the  digital  euro  and  generate  fee  income.  Increased 
efficiency in payments would also strengthen the role of the euro vis-à-vis the third country 
currencies, CBDCs and private stablecoins and provide a stimulus to innovation in payments 
markets. 

The online digital euro would provide less privacy when compared with cash. Privacy is an 
important feature for ensuring that people can behave freely without control by authorities or 
by  the  society  at  large.  However,  society  has  to  ensure  that  the  digital  euro  is  not  used  for 
illegal or criminal purposes. Thus, it seems proportional that online payments, which can be 
more  relevant  in  terms  of  AML  risks,  face  a  higher  level  of  control  when  compared  with 
offline  payments,  which  has  cash-like  features  (i.e.  proximity  payment).  The  offline  digital 
euro for small amounts would provide a high level of privacy. Thus, for those payments, the 
digital euro would largely replicate the anonymity function of cash.  

As  regards  financial  stability,  the  ECB  would  have  the  tools  to  ensure  that  there  is  not  a 
disproportionate degree of disintermediation and to maintain financial stability. They would 
aim to restrict the store of value function of a digital euro, so that an excessive conversion of 
bank deposits to digital euro that would endanger financial stability and monetary policy can 
be  prevented.  In  any  case,  the  Eurosystem  and  the  EU  would  benefit  from  the  maintained 
trust in the monetary system that is provided by a digital monetary anchor, which ultimately 
also supports the conduct and effectiveness of its monetary policy and thus contributes to a 
more stable macroeconomic environment. 

A digital euro would also enhance the open strategic autonomy of the EU. It would create a 
payment  system  which  is  fully  under  the  control  of  EU  authorities  and  thus  more  robust 
against  external  disruption.  This  benefit  would  not  be  visible  in  the  short  term,  but  could 
prove essential in case such an emergency were to occur.  

In  relation  to  the  international  role  of  the  euro,  Option  4c  would  not  achieve  a  major 
internationalisation of the euro in a direct way. Nevertheless, there is the possibility to enact 
Option  4b  at  a  later  stage,  for  transactions  with  non-euro  area  Member  States  and  third 

130 

 
 
countries,  provided  financial  stability  risks  are  sufficiently  contained.  This  would  then 
promote trade for euro area residents, and also reduce exchange rate risk.  

Overall,  the  many  benefits  outlined  in  relation  to  Options  1c,  1e/f,  2c,  2d,  3b,  would  also 
make the euro more attractive in an indirect way.  

2.  SUMMARY OF COSTS AND BENEFITS 

I. Overview of Benefits (total for all provisions) – Preferred Option 

Description 

Amount 

Comments 

Direct benefits 

Not quantifiable 

Availability of 
Eurosystem issued 
money in digital 
form  

The people would have access to a credit 
risk free money issued by the Eurosystem 
in digital form. 

The Eurosystem would benefit from 
maintained confidence in the monetary 
system and thus financial stability. Under 
certain circumstances, it could receive 
increased seignorage revenue from issuing 
a digital euro230  

The PSPs, especially credit institutions, 
would benefit from the stabilisation effect 
of central bank money on the privately 
issued forms of money (monetary anchor) 

The digital euro will provide for first time a pan-
euro area (free) P2P service.  

People would enjoy an additional payment 
means that is also a legal tender in digital 
form without cost for basic use.  

Additional choice on 
the pan-European 
payment market for 
people and 
businesses including 
merchants 

For POI payments,  

- 

- 

as they are currently perceived to be 
free of charge for citizens, there is no 
direct benefit to the end-user.  
For merchants: we expect no major 
impact; merchants might benefit from 
increased competition. Fees are 
expected to be framed. 

However, no serious estimation of direct 
benefits for citizens and merchants (in terms of 
fees reduction) can be made at this stage. 

Through issuance of digital euro as pan-
European means of payment, the 
Eurosystem would help further integrate the 
market for payment services in euro.  
PSPs could generate additional income by 
distributing the digital euro and providing 
value added services; they could likely also 
benefit from increased competition 

Subject to the distribution model, 
merchants may benefit from increased 
competition on the payments market that 
may lower transaction fees especially if 
framed. 

Online digital euro would offer similar 
privacy protection as current private 
payment means. 

The offline digital euro would provide high 
privacy for small value proximity 
payments, thus combining level of privacy 

Ensuring privacy of 
payments 

The investigation phase is still ongoing and no 
decisions on implementation of the specific 
design features have been made yet. Therefore, 
no quantifiable assessment can be given. 
Furthermore, benefits in this area would be 
mostly intangible (e.g. possibly improved 
privacy compared to current electronic 

230 To the extent that digital euro do not substitute banknotes, reserve remuneration is above digital euro remuneration, or issuing a digital 
euro leads to an expanded central bank balance sheet.  

131 

 
 
 
 
 
 
 
 
 
 
                                                           
payments). 

Increased financial 
inclusion 

The onboarding process should be comparable 
to today as AML and KYC requirements are 
comparable and also applicable in the Directive 
on payment accounts. While harmonised 
onboarding process may have a positive effect, 
no major cost saving for supporting financial 
inclusion compared to the base scenario are 
expected. 

Reduction in 
ecological footprint 
of payments  

The  benefit  will  depend  on  the  technological 
setup chosen by the ECB as well as the extent to 
which 
the  digital  euro  will  replace  cash 
transactions.  

Support of 
innovation 

Indirect benefits 

Creation and reinforcement of European 
expertise in the payment sector would give a 
boost to European payments industry at global 
level.    

Increased 
competition in 
domestic and pan 
European payments 

A quantitative estimate of benefits from 
increased competition in Europe may be made in 
terms of HHI index improvement, assuming e.g. 
the digital euro could get some xx% retail 
payments market share in 5 year-time. 

Increased resiliency 
(including vs. geo-
political risks) of 
European retail 
payments 
infrastructure 

A digital euro would increase the resilience of 
the European payment landscape. 
In particular, an offline digital euro would 
ensure the continuous provision of electronic 
payments in public money amidst connectivity 
outages and in the context of a declining use of 
cash. 

that is similar to that of cash with 
convenience of electronic payments 

Digital euro, as pan-European means of 
payment, would help ensure that the level 
of privacy is provided to Europeans in a 
harmonised way across Member States.   

Easy onboarding, cost free and easy use 
including offline payments would increase 
financial inclusion in the digital age when 
cash is less usable. 

The digital euro may exhibit small 
advantages in terms of energy consumption 
compared to current digital payment 
channels. This will depend on the 
technological design and structural setup of 
the payment network. It will have a 
substantially lower ecological footprint than 
cash given energy and chemicals needed for 
printing/coinage and the fuel required to 
transport bank notes and coins.    

Support of advanced functionalities in the 
digital euro infrastructure (e.g. conditional 
payments) could enable novel use cases and 
provision of additional services, thus 
fostering innovation in the European 
payments market. 

The digital euro infrastructure available for 
new market participants can increase 
competition especially at pan European 
level. 

A digital euro is well placed to compete 
with third country issued CBDCs and 
stablecoins, in particular through provision 
of functionalities that are at least as 
attractive as those of the payment solutions 
available in foreign currencies or through 
unregulated entities. This would preserve 
the global reputation of the euro, not least if 
other major foreign central banks press 
ahead with issuing CBDC. 

However, the offline digital euro, due to the 
necessary pre-funding step, would need to 
be sufficiently used in normal times to 
foster resilience effectively. This is akin to 
the need of withdrawing cash in advance of 
the ATM network outage. 

(1) Estimates are gross values relative to the baseline for the preferred option as a whole (i.e. the impact of 
individual actions/obligations of the preferred option are aggregated together); (2) Please indicate which 

132 

 
 
 
 
 
 
stakeholder group is the main recipient of the benefit in the comment section;(3) For reductions in regulatory 
costs, please describe details as to how the saving arises (e.g. reductions in adjustment costs, administrative 
costs, regulatory charges, enforcement costs, etc.;); (4) Cost savings related to the ’one in, one out’ approach 
are detailed in Tool #58 and #59 of the ‘better regulation’ toolbox. * if relevant 

II. Overview of costs231 – Preferred option 

Citizens/Consumers 

Businesses 

Administrations 

One-off 

Recurrent 

One-off 

Recurrent 

One-off  Recurrent 

Digital 
euro 
available 
for retail 
payments 
within the 
euro area   

Direct 
adjustment 
costs 

Learning costs 
such as those 
associated with 
online banking 
or new apps, 
but the 
technical 
solutions 
necessary to 
transact would 
be provided to 
them free of 
charge. 

No direct cost 
is expected as 
basic services 
are expected to 
be provided 
free. 
Additional 
funding/defundi
ng means and 
payment 
services above 
the basic offer 
can be charged. 

Cost for merchants 
are not possible to 
precisely calculate 
due to lacking 
information on key 
design features. 
Based on data from 
the ECB i.e. the 
cost of updating 
existing European 
terminals for the 
acceptance of non-
proprietary NFC 
and/or QR codes 
would range 
between EUR 40 
and EUR 75 per 
terminal and 
calculating with 
13.5 million POS 
terminals in the 
euro area (as 
reported by the 
ECB for end 
2021232), the 
merchants in the 
euro area that 
already accept 
electronic 
payments can 
foresee a total cost 
of about EUR 0.5-1 
billion when 
implementing a 
new terminal 
standard. For 
merchants not yet 
accepting digital 
means of 
payments, the 
additional one-off 
cost could range 
between EUR 125 
million and EUR 

Merchants 
would also 
incur annual 
maintenance 
cost and 
transaction fees. 
These costs are 
not expected to 
be higher than 
the costs of 
current 
payments 
means. 

PSPs would 
incur network 
service fees and 
operational 
costs, including 
AML/CFT and 
fraud checks, 
and transaction 
management, 
customer 
onboarding and 
support. These 
fees are 
expected to be 
similar to the 
costs of current 
similar 
functions. 
At the same 
time, they will 
benefit from 
economies of 
scale and scope 
resulting from 
reutilisation of 
existing 
services and 
processes. 
These costs 
cannot be 

231 Cost of the Eurosystem was not analysed here as the ECB will do its own assessment as part of its mandate. 
232 https://sdw.ecb.europa.eu/reports.do?node=1000001404 

133 

 
 
 
 
 
 
 
 
 
                                                           
estimated at the 
moment due to 
uncertainties as 
regards design 
elements and 
future demand. 

250 million. 

PSPs would bear 
one-off cost 
including in 
relation to adapting 
front-end systems 
(apps, online 
banking, ATMs), 
back-end systems 
(incl. 
acquiring/issuing 
and integration 
with settlement and 
account 
management 
systems), and 
adapting 
AML/KYC, anti-
fraud, accounting 
and other business 
processes.  
Most of these are 
in place already for 
other payment 
services.   
These cost for the 
PSPs cannot be 
estimated at this 
point lacking key 
information about 
the design, 
however based on 
the IA on Instant 
Payments, a basic 
estimate for one-
off costs for PSPs 
indicates costs of 
up to EUR 5.4 
billion (1e) and 
EUR 4.8 billion 
(1e) (or up to EUR 
1.3 million per 
PSP), while a more 
elaborate 
estimate233 
suggests costs up to 
EUR 2.8 billion 
(1e) and EUR 2.5 
billion (1f). 

Direct 
administra
tive costs 

None 

None 

None 

No incremental 
costs are 
expected on top 

233 The share of two size groups of PSPs were estimated based on a sample of 2,886 PSPs that adhere to the SEPA credit transfer scheme, 
and whose total assets data was available in the ORBIS database. As a result, it was assumed that 53.6% of the relevant institutions had total 
assets below 1 billion euro. As per the Commission Impact Assessment on Instant Payments, for the lower bucket, the range of one-off 
compliance costs reported was EUR 10 000 to EUR 143 000, while for the upper bucket the range was EUR 100 000 to EUR 1.3 million. 
Please also see Section 6.2.1.  

134 

 
 
 
 
 
                                                           
Direct 
regulatory 
fees and 
charges 

Direct 
enforceme
nt costs 

Indirect 
costs 

Direct 
adjustment 
costs  

Indirect 
adjustment 
costs 

Administr
ative costs 
(for 
offsetting) 

Total   

of current 
reporting 
requirements. 

None 

None 

None 

None 

None 

None 

None 

None 

None 

None 

None 

None 

Costs related to the ‘one in, one out’ approach 

Learning costs  None 

Implementation 
costs in the ranges 
given above 

Cannot be 
estimated at the 
moment due to 
uncertainties, 
but not 
expected to 
increase 
substantially as 
compared to the 
costs of current 
payments 
means that the 
digital euro 
would replace. 

None 

None 

None 

None 

None 

None 

None 

No incremental 
costs are 
expected on top 
of current 
reporting 
requirements. 

(1) Estimates (gross values) to be provided with respect to the baseline; (2) costs are provided for each 
identifiable action/obligation of the preferred option otherwise for all retained options when no preferred 
option is specified; (3) If relevant and available, please present information on costs according to the standard 
typology of costs (adjustment costs, administrative costs, regulatory charges, enforcement costs, indirect 
costs;). (4) Administrative costs for offsetting as explained in Tool #58 and #59 of the ‘better regulation’ 
toolbox. The total adjustment costs should equal the sum of the adjustment costs presented in the upper part 
of the table (whenever they are quantifiable and/or can be monetised). Measures taken with a view to 
compensate adjustment costs to the greatest extent possible are presented in the section of the impact 
assessment report presenting the preferred option. 

3.  RELEVANT SUSTAINABLE DEVELOPMENT GOALS 

III. Overview of relevant Sustainable Development Goals – Preferred Option(s) 
Relevant SDG 

Expected progress towards the Goal 

Comments 

SDG 

no. 

12 

–  Especially in the long-term it is expected that the  The  ECB’s  objective  is  that  “the 

135 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
design  of  the  digital  euro  should  be 
based on technological solutions that 
minimise its ecological footprint and 
improve that of the current payments 
ecosystem”234.  It  should  therefore 
support progress on SDGs no. 12 and 
13, 
concerns 
lowering  energy  consumption  and 
CO2 
detailed 
assessment  can  only  be  done  at 
implementation level. 

in  particular 

emissions. 

as 

A 

responsible 
consumption 
and 
production  and  SDG 
no.  13  –  climate 
action 

digital  euro  would  replace  some  current  cash 
payments.  The  environmental 
footprint  of 
bringing  digital  euros  into  circulation  will  be 
substantially  lower  than  bank  notes  and  coins 
(printing/coinage, transportation etc.). The energy 
consumption  of  a  CBDC  has  been  deemed 
comparable to that of a credit card system. 

234 ECB Report on a digital euro, October 2020. 

136 

 
 
 
 
                                                           
Annex 4 - Analytical methods 

Impact on European banks’ balance sheets (JRC) 

The  aim  of  JRC’s  analysis  is  to  look  at  possible  demand  scenarios  for  a  retail-only  digital 
euro and assess their impact on bank’s balance sheets. Replicating the approach presented in 
an article from the ECB,235 JRC built a set of demand scenarios at Member State level. These 
scenarios are based on data about households,  deposits, and cash holdings. The demand for 
digital  euros  ranges  from  1  to  10  thousand  euros  per  person.  In  line  with  the  assumptions 
made in the ECB’s article, JRC assumed that up to half the current amount of cash held by 
individuals  is  substituted  for  the  digital  euro  before  people  convert  their  bank  deposits  for 
digital  euros.  In  a  static  analysis,  JRC  then  highlights  how  these  demand  scenarios  would 
translate  in  terms  of  banks’  total  liabilities,  reserves,  wholesale  funding  and  lending.  This 
allows the analysis to assess the extent to which banks balance sheets may be affected by the 
different demand scenarios.  

Bank profitability (JRC) 

This analysis aims at investigating the link between the adoption of a digital euro and banks’ 
profitability. The introduction of a CBDC is simulated as a shock to banks’ deposit ratios and 
based  on  the  three  demand  scenarios  highlighted  in  the  ECB’s  article.236  The  analysis  then 
assesses  the  probabilistic  impact  of  these  shocks  on  banks’  profitability  through  quantile 
regressions with fixed effects. 

DSGE analysis (JRC) 

A dynamic stochastic general equilibrium model (DSGE) comprising a banking sector is used 
to  assess  how  the  presence  of  a  CBDC  changes  an  economy’s  dynamic  Reponses  to 
macroeconomic  shocks.  In  the  model,  money  can  either  take  the  form  of  cash  or  CBDC, 
which are considered imperfect substitutes, with cash carrying storage costs. 

235 (Adalid et al., 2022 
236 (Adalid et al., 2022) 

137 

 
 
 
 
                                                           
Annex 5 - Technical glossary  

1  What are the main design options for a CBDC from the user perspective (“front-

end”)? 

An intermediary is an entity (probably a payment service provider, a category that includes 
banks) that distributes to its clients the CBDC* issued by the central bank. It is responsible 
for ensuring customer services and the “know your client” and other anti-money laundering 
procedures. In the (theoretical) model of a direct CBDC*, the task of intermediaries would be 
directly  performed  by  the  central  bank.  Intermediaries  are  not  the  legal  counterparts  of  the 
clients’ CBDC claim, otherwise the “CBDC” would no longer be a central bank liability but a 
form of commercial bank money*. 

Account-based vs. bearer-based  

Bearer instruments, for example certain tokens* stored on hardware secure elements*(similar 
to a SIM card in a cell phone), are assets than can be exchanged on a pure peer-to-peer basis, 
i.e. without any intermediary* settling, recording or intervening in the transaction. This is not 
the case of most crypto-assets, which are account-based as their distributed ledgers are indeed 
storing lists of holdings. This is tantamount to accounts whose central bookkeeper is replaced 
by a network of notaries and for which tokens play the role of ID identifier. Importantly, the 
latter does not  exclude the former: developing bearer-based solutions  in  a CBDC project  is 
compatible with an architecture functioning principally with accounts. 

Source: Auer and Böhme (2020), Bank of International Settlements 

Offline use. Offline digital euro is a use of a CBDC in absence of connectivity to the main 
communication network.  

A peer-to-peer offline digital euro is a digital euro whose transactions are settled offline (i.e. 
with  payer  and  payee  in  physical  proximity)  and  where  the  rules  set  by  the  Eurosystem 

138 

 
 
 
 
 
 
(including  settlement  finality  and  tools  to  avoid  money  laundering  and  excessive  use  of 
digital  euro  as  form  of  investment)  are  enforced  without  the  operational  intervention  of  a 
third party.  

This digital euro type is more suitable to preserving traditional uses of cash in the digital age, 
particularly relevant  for  resilience,  financial inclusion and a high level  of privacy.  It  would 
likely  be  seen  as  a  complement  to  an  online  digital  euro  (see  below),  since  it  cannot  offer 
advanced functionalities and remote payments (e.g. e-commerce). 

An offline digital euro would provide users with a contingency option in times of a network 
services outages and would improve the resilience of the retail payments infrastructure in the 
euro area. This role is currently fulfilled by cash. Similarly to cash, the digital euro holdings 
that  would  be  available  offline  need  to  be  prefunded  and  stored  on  user  devices  before  the 
network outage materialises. An offline digital euro could act as a backup only as long as the 
amount  prefunded  by  users  in  their  devices  is  sufficient  to  satisfying  their  payment  needs 
until the network connectivity will be restored. To withstand potential network outages and 
provide resilience an offline digital euro should be enabled by its wide accessibility, use, and 
sufficient holdings during the normal times.  

Online  digital  euro.  A  Third-party  validated  online  digital  euro  is  a  digital  euro  solution 
where  transactions  between  payer  and  payee  would  be  settled  online  (i.e.  without  the 
necessity  for  transacting  parties  to  be  in  physical  proximity)  and  with  the  operational 
intervention by a third party. A third-party online digital euro would particularly help foster 
the provision of innovative digital services (e.g. value-added services with digital euro inside) 
and PSPs (e.g. new business models through provision of value added services), while having 
the potential to be relatively easily integrated with the existing payment infrastructures (with 
other online payments).  

In  case  of  a  third-party  validated  online  digital  euro,  transactions  of  any  size  would  be 
recorded, providing a third party (i.e. intermediary) the possibility to conduct checks.  

A token is, in general terms, something physical or digital that a person possesses, controls, 
and uses to authenticate his or her identity. Passwords or cryptographic keys can be used as 
tokens or generated by a physical token. In the crypto-assets* universe, cryptographic tokens 
are generally the unique way to prove the holding of assets. By extension, tokens have been 
assimilated to the assets they represent. 

2  What are the main design options for a CBDC from the IT perspective (“back-

end”) 

a)  The underlying IT infrastructure 

Distributed  Ledger  Technology  (DLT)  consists  in  an  IT  architecture  that  validates  and 
stores information in a decentralised way. Compared to other forms of information validation 
and storage, it does not recognise a parent ledger but uses a consensus algorithm to which all 
servers  participate  playing  the  role  of  nodes  in  the  DLT  network  When  any  computer  can 
participate  to  the  network  as  a  validator  node,  the  DLT  is  “permissionless”.  When  the 
network is operated by a list of authorised computers, it is “permissioned”. 

Blockchain is a form of DLT*, which refers to the technological infrastructure and protocols 
that  allows  simultaneous  access,  validation,  and  record  updating  in  an  immutable  manner 
across a network that spreads across multiple entities or locations. Developed to store time-
stamped information about transactions, blokchain is considered the most appropriate tool in 
the DLT universe to constitute a crypto-asset* ledger, but can also  be used, for instance, to 

139 

 
 
create  a  secured  repository  of  diploma  or  digital  artwork  ownership  certificates.  This 
technology  can  be  (and  has  been)  used  as  a  ledger  for  a  CBDC*:  all  DLT-based  CBDC 
projects  have  opted  for  a  blockchain  solution,  such  as  the  Bahamian  sand  dollar.  Since 
blockchain  processes  transactions  not  one  after  another  but  grouped  in  blocks,  it  eases  the 
simultaneous  treatment  of  certain  transactions  such  as  atomic  settlements*  and  smart 
contracts*. Contrary to traditional databases, blockchains do not record data using a central 
controller  whom  users  must  trust,  such  as  a  bank.  If  used  for  a  CBDC,  the  blockchain 
technology would hence in theory allow for more innovative uses. 

Target  Instant  Payment  System  (TIPS)  a  market  infrastructure  service  launched  by  the 
Eurosystem  in  November  2018.  It  enables  payment  service  providers  to  offer  instant  fund 
transfers to their customers around the clock. It was developed as an extension of TARGET2 
and settles payments in central bank money. TIPS settles so far payment transfers in euro but 
could be extended to other currencies: as of May 2022, TIPS will settle instant payments in 
Swedish  krona.  TIPS  could  be  used  as  an  instrument  to  settle  digital  euro  transactions. 
However,  it  was  not  conceived  to  enable  more  innovative  features  such  as  atomic 
settlements*  and  smart  contracts*.  Such  features  could  work  with  TIPS  only 
if 
interoperability* is ensured with blockchain*-based solutions through appropriate oracles*. 

A secure element is a hardware device ex ante homologated to run IT operations in isolation 
from  the  rest  of  a  larger  device  it  is  inserted  in.  It  is  a  probable  requirement  for  hosting 
bearer’s instrument* and allowing offline use.* SIM-cards in smart phones can be compared 
to a secure element. It should not be confused with a “trusted execution environment”, which 
is  a  secured  storage  or  applicative  facility  on  an  IT  device  that  still  relies  on  the  main 
processor to run. 

b)  Interaction between infrastructures 

Interoperability is the ability of an IT system to exchange data with other systems in order 
to  process  information.  For  a  CBDC*,  interoperability  matters  to  ensure  a  proper 
communication  between  clients’  and  merchants’  devices.  This  is  especially  important  for 
offline  use*  (where  all  the  communication,  including  security  checks  should  be  performed 
between the two devices) and for a possible non-domestic use (technical standards at point of 
sale  may  be  different  across  jurisdictions).  Interoperability  also  matters  for  connecting  the 
CBDC  with  banking  accounts  and/or  interbank  operations.  For  instance,  a  potential  DLT*-
based CBDC* could be interoperable with TIPS* thanks to appropriate oracles*. 

Oracle is an IT programme that connects a blockchain with traditional IT systems in order to 
make interoperability* possible in a way comparable to applicative interfaces (API) between 
two  or  more  traditional  IT  systems.  Oracles  would  be  the  likely  the  technical  solution  to 
ensure  the  transition  between  a  CBDC*  run  on  a  DLT*  and  legacy  systems,  or  between  a 
CBDC run on a traditional ledger and private solution offering commercial bank money* on a 
blockchain*. We can expect that the conception and functioning of oracles will be one of the 
cornerstones of the innovation agenda. 

A  multiple CBDC bridge is  an interoperability* platform developed to ensure  an  efficient 
system of cross-border payments between different CBDCs. Several central banks (including 
the  PBoC)  are  conducting  a  joint  experimentation  with  the  BIS  under  the  acronym  of 
mCBDC.  The  ECB  is  sceptic  regarding  the  ability  of  such  projects  to  deliver  any  scalable 
output  in  the  short  run.  If  an  international  standard  resulted  from  these  tests,  they  could 
ensure  a  first  mover  advantage  to  jurisdictions  that  structured  these  platforms  based  on  the 
distinctive features of their own CBDC projects. 

140 

 
 
3  What kind of digital innovation could a CBDC (indirectly) support? 

a)  Solutions  for  conditional  payments237  primarily  developed  within  DLT 

environments 

A “smart contract” is not a contract in a legal sense but an IT programme to be executed on 
a  blockchain*  that  describes  complex  transactions  involving  for  instance  conditional 
operations, delivery-versus-payment features or auction mechanisms. A smart contract can be 
defined as “an event-condition-action stateful computer programme, executed between two or 
more parties that are reluctant to trust each other unguardedly”238. Smart contracts promoters 
assert  that  the  potential  of  this  tool  widely  exceed  what  programming  features  of  legacy 
payment systems can deliver. Even though several CBDC projects run on blockchains*, it is 
hardly  conceivable  that  a  blockchain*  developed  by  a  central  bank  directly  runs  smart 
contracts. Indeed the central bank blockchain* is to ensure a robust backbone of a CBDC and 
should not made vulnerable through the execution of programmes developed by third parties. 
However, that being said, it is conceivable to link a DLT-based CBDC to smart contracts on 
distributed ledgers of third-parties, without storing the smart contract on the blockchain of the 
central  bank.  The  possible  contribution  of  CBDC  to  innovation  in  regards  of  conditional 
payments  could  lie  in  enabling  the  settlement  of  machine-to-machine  payments  with  smart 
contracts  on  private  distributed  ledgers  in  central  bank  money  and  thus  facilitate  the 
emergence of innovative payments solutions. 

An atomic settlement is a blockchain*-based approach to settlement consisting in executing 
in  the  same  block  (i.e.  in  perfect  synchrony)  a  payment  and  other  operations  bundled  in  a 
smart  contract*.  Atomic  settlement  can  reduce  the  risks  associated  to  the  settlement  of 
securities  to  virtually  zero.  Atomic  settlement  can  also  improve  delivery-versus-payment 
processes of digital as well as physical assets.  

Decentralised  finance  (DeFi)  is  an  umbrella  term  for  crypto-assets*  solutions  aimed  at 
offering  services  on  a  blockchain*  that  reproduce  financial  services  like  lending,  saving, 
arbitraging and trading without an identified unique counterparty such as a bank. It builds on 
smart  contracts*  and  the  properties  of  atomic  settlement*.  Tailoring  a  CBDC  to  support 
actively the emergence of DeFi would raise similar IT integrity risks and policy concerns as 
hosting  smart  contracts,  especially  before  a  clearer  regulation  framework  has  emerged. 
However,  DeFi  would  highly  benefit  of  any  improvement  of  its  interoperability*  with 
existing systems. 

b)  Solutions requiring cheap and instant digital payment solutions 

Micropayments  are  payments,  typically  invoiced  for  pay-as-you-go  services  (such  as  for 
using an infrastructure for a certain mileage or time period), that are too small to be profitably 
processed in the current infrastructures. 

Stream payments are payments instantly invoiced on a continuous basis as long as a service 
is used. 

Machine-to-machine  payments  are  payments  automatically  triggered  when  autonomous 
systems  (a  self-driving  car,  a  robotised  production  line)  perform  certain  actions.  Some  of 
these use cases require  micropayments,  stream  payments  or smart  contracts  to  be executed. 

237 See Annex 8 on the evolution of the internet and payment needs of industry 4.0. 
238 Definition provided in C. Molina-Jimenez, E. Solaiman, I. Sfyrakis, I. Ng, J. Crowcroft, On and Off-Blockchain Enforcement of Smart 
Contracts, in Euro-Par 2018 International Workshops, Turin, 2018, pp. 342-354. 

141 

 
 
                                                           
Introducing  a  CBDC  is  not  per  se  a  game  changer  but  could  offer  new  interoperability* 
solutions. 

142 

 
 
 
 
 
 
Annex 6 - Cash usage 

In a fast-changing payment landscape, the role of cash is “paradoxically”239  changing. 
While its demand has increased during the pandemic and its use as a store of value has 
increased,  its  use  as  a  means  of  payment  has  been  declining.  According  to  the  ECB’s 
recent  study  on  the  payment  attitudes  of  consumers  in  the  euro  area,  consumers  still 
predominantly use cash for Point-of-Sale (POS) and Person-to-person (P2P) payments, but its 
share  is  declining  everywhere.  It  is  estimated  that  less  than  one-third  of  banknotes  in 
circulation240  are  used  for  transaction  purposes.  Meanwhile 
the  demand  for  high 
denomination notes not commonly associated with payments, has been sustained or has even 
slightly increased. 

239 European Central Bank (2021), “The paradox of banknotes: Understanding the demand for cash beyond transactional use”. The ECB 
estimates that the vast majority of cash, around one trillion euro, is held as an asset (store of value function) and used only sporadically for 
payments or is circulating outside the euro area. 
240 According to the ECB (« The paradox of banknotes: understanding the demand for cash beyond transactional use », ECB Economic 
Bulletin, Issue 2/2021), between 13% and 30% of the value of banknotes in circulation was held for the purpose of euro area transactions, 
yielding a central estimate of 21,5% (EUR 280 billion). 

143 

 
 
 
 
                                                           
Cash  is  predominantly  used for  low  value  payments.  The  significant  difference  between 
the number and value of cash transactions (59% in number, 42% in value) is due to the more 
frequent  use  of  cash  for  low-value  transactions.  For  payments  below  €5,  the  share  of 
payments  using  a  card  went  from  7%  in  2019  to  15%  in  2022.  Similarly,  for  payments 
between €5 and €10, the share of card payments went from 15% in 2019 to 24% in 2022 In 
addition, the share of cash transactions decreases significantly as transaction value increases. 
Cards were the most used payment method at the POS for purchases over €30. Nonetheless, 
nearly one-third of POS payments over €100 were still made in cash. 

144 

 
 
 
 
Use of payment instrument in the euro area at POS, by value range (2022) 

Sources ECB (2022), including calculations based on De Nederlandsche Bank and the Dutch 
Payments Association (2022) and Deutsche Bundesbank (2022). 

The  COVID-19241  pandemic  has  accelerated  this  shift  toward  digital  payments242, 
largely on the back of increased e-commerce.  

According to the SPACE survey, in 2022 more than half (55%) of consumers explicitly stated 
their preference for cards or other cashless payment instruments. 

In the most recent SPACE survey from the ECB (2022), respondents were asked to evaluate 
how  and  why  their  payment  habits  had  changed  in  the  two  or  three  years  preceding  the 
outbreak of the pandemic: 

  54% of respondents say that they did not change their payment behaviour with regard 
to using cash at physical locations due to the pandemic. 31% said that they used cash 
less often than before the pandemic and 14% said they used it more often. 

241 Bank of International Settlements (2021), “Covid-19 accelerated the digitalisation of payments 
242 Auer, Raphael, Cornelli, Giulio and Frost, Jon, (2020), “Covid-19, cash, and the future of payments”, No 3, BIS Bulletins, Bank for 
International Settlements. 

145 

 
 
 
 
 
                                                           
  The  most  frequently  mentioned  reason  (mentioned  by  more  than  half  of  those  who 
reduced  their  use  of  cash  during  the  pandemic)  was  that  paying  electronically  has 
become more convenient. 

  37%  of  consumers  were  buying  goods  online  more  frequently  than  before  the 

pandemic, while 41% said there had been no change. 

Nonetheless,  differences  in  cash  usage  habits  are  significant  across  Member  States.  
Consumers’ and  retailers’ preferences and probably the absence of harmonisation  so far on 
legal  limits  for  cash  payment  have  contributed  to  the  different  levels  of  cash  usage.  For 
instance, the highest shares in terms of number of cash payments were observed in Malta (77 
%), Slovenia (73 %), Austria (70 %) and Italy (69 %), and in terms of value of payments in 
Malta (65 %), Lithuania (61 %) and Slovenia (59 %). Compared to 2019, the number of cash 
payments decreased in most euro area countries. 243. 

The  decreasing  use  of  cash  as  a  payment  means  has  also  coincided  with  increasing 
barriers  to  have  access  to  cash.  As  reflected  in  fact-finding  exercises  of  the  Euro  Retail 
Payments Board (ERPB) and the Euro Legal Tender Experts Group (ELTEG III), access to 
cash  seems  to  have  remained  easiest  in  those  Member  States  which  were  already  cash 
intensive,  but  the  situation  in  other  Member  States  reveals  a  gradual  but  structural 
deterioration of effective access possibilities, reflected in various issues such as the reduction 
of  the  ATM  withdrawal  and  depositing  infrastructure,  and  the  imposition  of  (high) 
withdrawal  fees.  ATMs  form  part  of  a  nation’s  critical  cash  cycle  infrastructure  for 
distribution  and  for  round-the-clock  self-service  banking.  The  European  Association  for 
Secure  Transactions  estimated  that  there  were  375,852  ATMs  in  Europe  in  2021,  a  9% 
decrease from the 2012 total. 

These two aspects, in turn, have had direct and indirect impacts on the use of cash payments 
in the consumer economy, including on budgeting, savings and finances for households and 
families.  Therefore,  a  reduction  in  the  ATM  infrastructure,  often  related  to  the  cost 
considerations  of  maintaining  such  a  network  and  efficiency  gains,  significantly  impairs 
access  to  cash  by  the  general  public.  This  in  turn  also  negatively  affects  the  public’s 
possibilities  to  use  cash  as  a  payment  means,  eroding  the  capacity  to  use  it  as  an  official 

243 European Central Bank (2020), Study on the payment attitudes of consumers in the euro area (SPACE) 

146 

 
 
 
 
                                                           
currency with legal tender status. Moreover, the closure of bank branches as an alternative to 
ATM’s  forms  an  additional  barrier.244  A  wide  range  of  national  initiatives  are  being 
undertaken,  from  studies  that  closely  monitor  access  to  cash,  to  covenants  and  stakeholder 
agreements in order to guarantee cash availability. Nevertheless, the situation on the ground 
regarding cash access  is becoming increasingly  heterogeneous, with  several  Member States 
asserting  that  EU-level  action  regarding  cash  access  is  warranted  now  or  in  the  short-term 
future. 

Acceptance  of  cash  is  another  aspect  that  affects  its  usability.  As  set  out  in  a  recent 
judgment  of  the  Court  of  Justice  of  the  European  Union245  and  the  Commission 
Recommendation 2010/191/EU of 22 March 2010 on the scope and effects of legal tender of 
euro  banknotes  and  coins,  one  of  the  key  principles  of  legal  tender  is  its  mandatory 
acceptance.  Therefore,  the  status  of  legal  tender  of  euro  banknotes  and  coins  implies,  in 
principle,  an  obligation  to  accept  them,  whilst  at  the  same  time  not  precluding  national 
sectoral  legislation  outside  of  the  scope  of  monetary  law  (which  is  an  exclusive  Union 
competence)  that  may  stipulate  exceptions  to  this  rule  for  reasons  of  public  interest  (for 
example, as a matter of tax policy, public administration, or criminal law). Recommendation 
2010/191/EU  also  mentions  that  the  acceptance  of  cash  as  means  of  payments  in  retail 
transactions  should  be  the  rule.  A  refusal  thereof  should  be  possible  only  if  grounded  on 
reasons  related  to  the  ‘good  faith  principle’  (for  example,  if  the  retailer  has  no  change 
available). 

In practice,  and in  the absence of a detailed regulation  of the legal  tender of euro cash, the 
application  of  legal  tender  on  the  ground  may  vary  between  the  euro  area  Member  States. 
This  has  led  to  a  divergent  situation  regarding  cash  acceptance  across  the  euro  area.  For 
example, whilst in some Member States sanctions exist for cash non-acceptance by retailers, 
in others, due to the freedom of contract, the payer and the payee can agree not to use cash if 
informed in advance. Therefore, in some countries cash may not be refused, whilst in others 
refusal to accept cash is seen as part of contractual freedom, if the parties agree on another 
form  of  payment.  Evidence  gathered  by  the  Euro  Retail  Payments  Board  (ERPB)246  and  in 
the  context  of the  Euro Legal  Tender  Experts  Group  (ELTEG  III)247  points  out  that,  whilst 
cash acceptance remains generally high throughout the euro area, cases of non-acceptance do 
exist in  practice.  For  example,  a  study  undertaken  in  the  Netherlands  indicates  a  cash  non-
acceptance incidence rate of 7% in urban areas versus 3% rural areas.248 

244 ELTEG III questionnaire report on cash availability 
245 Judgment of 26 January 2021 in joined cases Johannes Dietrich and Norbert Häring v Hessischer  
Rundfunk, (C‑422/19 and C‑423/19, ECLI:EU:C:2021:63).  
246 As gathered by the Euro Retail Payments Board (ERPB) in its Report of the ERPB Working Group 
on Access and Acceptance of Cash 0-68 2021 
247 ELTEG III Questionnaire report on acceptance of cash 
248 ‘Dutch retailers continue to accept cash’ (https://www.dnb.nl/en/actueel/dnb/dnbulletin-2020/dutch-retailers-continue-to-accept-cash/) 
and ‘Who decides the way we pay – retailer or customer?’ (https://www.dnb.nl/en/actueel/dnb/dnbulletin-2020/who-decides-the-way-we-
pay-retailer-or-customer/) 

147 

 
 
 
 
                                                           
Annex 7 - Legal tender for cash 

Background 

three 

The  Commission  has  convened 
times  an  expert  group  of  Member  States’ 
representatives (ELTEG I, II and III) in order to discuss what legal tender of cash means. A 
Commission Recommendation, adopted in 2010, outlined a common definition of the concept 
of legal tender.249 Point 1 of the 2010 Recommendation defines the concept of legal tender of 
euro  cash  as  entailing  a  general  obligation  in  principle  of  the  acceptance  of  cash  by  the 
creditor  for  the  settlement  of  the  monetary  debt  by  a  debtor  (‘mandatory  acceptance’, 
‘acceptance at full face value’ and ‘power to discharge from payment obligations’). The 2010 
Recommendation also mentions two other important principles that follow from the status of 
legal tender of euro banknotes and coins. First, the acceptance of cash as means of payments 
in retail transactions should be the rule. A refusal thereof should be possible only if grounded 
on  reasons  relating  to  the  ‘good  faith  principle’  (for  example  the  retailer  has  no  change 
available).250  Second,  no  surcharges  should  be  imposed  on  payments  in  cash.251  These 
principles  have  been  cited  in  the  Hessischer  Rundfunk  judgment  of  26  January  2021.  In  its 
judgment  in  the  legal  tender  cases252,  the  Court  of  Justice  held  that  the  concept  of  ‘legal 
tender’ of euro banknotes enshrined in Article 128(1) TFEU is a concept of Union law that 
must  be  given  an  autonomous  and  uniform  interpretation  throughout  the  European  Union. 
That interpretation is that a means of payment denominated in a currency unit signifies ‘that 
means  of  payment  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’253. 
Therefore,  the  concept  of  legal  tender  as  interpreted  by  the  Court  of  Justice  for  euro 
banknotes implies: (i) mandatory acceptance, (ii) acceptance at full face value and (iii) effect 
of discharging payment obligations,254 as set out by Point 1 of the 2010 Recommendation.  

Problem definition: legal tender of cash, acceptance of and access to cash 

Given  that  the  2010  Recommendation  is  a  non-binding  act  that,  in  addition,  has  not  been 
widely  followed,  legal  uncertainty  remains  in  the  euro  area  concerning  the  scope  of  legal 
tender for euro cash. Moreover, revising this Recommendation would be unlikely to result in 
a  common  application  and  interpretation  of  legal  tender  principles,  whilst  the  continued 
fragmentation  of  the  situation  across  the  euro  area  would  not  be  coherent  with  the  EU’s 
exclusive  competence  for  monetary  policy  and  its  decision  to  opt  for  a  regulation  of  legal 
tender of the digital euro. In particular, the principles set out in the ELTEG III final report, 
confirm that if legislation on the digital euro were to regulate its legal tender status, it would 
be in the interests of coherence and better law-making to also regulate the legal tender status 
of  cash.  The  targeted  consultation  on  the  digital  euro255,  which  included  a  section  on  the 

249 Commission Recommendation 2010/191/EU of 22 March 2010 on the scope and effects of legal tender of euro banknotes and coins.  
250 See Point 2 of Commission Recommendation 2010/191/EU.  
251 See Point 4 of Commission Recommendation 2010/191/EU. 
252 Judgment of 26 January 2021 in joined cases Johannes Dietrich and Norbert Häring v Hessischer Rundfunk, (C-422/19 and C-423/19, 
ECLI:EU:C:2021:63).  
253 See judgment of 26 January 2021 in joined cases Johannes Dietrich and Norbert Häring v Hessischer Rundfunk (C-422/19 and C-423/19, 
ECLI:EU:C:2021:63, § 46).   
254  See  judgment  of  26  January  2021  in  joined  cases  Johannes  Dietrich  and  Norbert  Häring  v  Hessischer  Rundfunk,  (C-422/19  and 
C-423/19, ECLI:EU:C:2021:63, § 49).   
255 The analysis of the results of this targeted consultation are presented in annex 2. 

148 

 
 
 
                                                           
implications of the possible granting of legal tender status to the digital euro for the definition 
of  legal  tender  of  cash,  also  shows  that  if  legal  tender  was  granted  to  the  digital  euro,  the 
majority of targeted stakeholder groups consider that legislative action at EU level is needed 
to enhance legal certainty and enshrine the legal tender status of euro cash. 

The outcome of the ELTEG III discussions confirm the legal uncertainty regarding the legal 
tender of euro cash and differing application of its principles in the euro area, and identified a 
range  of  issues  of  acceptance  and  availability  of  cash  on  the  ground.256  Regarding  cash 
acceptance,  several  Member  States  reported  an  increase  in  the  number  of  retailers  not 
accepting  cash.  In  the  Netherlands,  for  example,  whereas  96%  of  physical  retailers  still 
accepted cash in 2020, 9% of physical retailers indicate that they expect not to accept cash in 
5  years’  time.  Furthermore,  non-acceptance  is  already  more  prevalent  in  the  entertainment 
(6%),  hospitality  (5%)  and  retail  pharmacy  sectors  (10%).257  The  2022  ECB  SPACE  study 
confirms a generally high level of euro area wide cash acceptance for now, but the start of a 
declining  trend  in  acceptance  in  most  Member  States  can  be  seen.258  In  fact,  the  euro  area 
average masks the fact that some Member States seem to have experienced a more significant 
decline  in  cash  acceptance  between  2019  and  2022,  with  six  Member  States  reporting  a 
percentage point decrease of 5 points or higher, including two Member states which reported 
a  9  percentage  point  decrease.259  This  points  to  a  situation  where  limited  or  circumstantial 
private restrictions on cash payments  could  evolve, because of their volume, into structural 
restrictions or exclusions of cash acceptance. This negatively affects the ability for cash to be 
used as an effective means of payment.  

The findings  of the ELTEG  III  report, EPRB  report and ECB studies also point to  a rather 
heterogeneous  and  sometimes  problematic  situation  regarding  cash  access  amongst  the 
Member  States.  Cash  access  seems  to  remain  strongest  in  those  Member  States  which  are 
already cash intensive, whilst others point to a gradual but structural deterioration of access, 
reflected in various issues such as the reduction of the ATM infrastructure and the imposition 
of withdrawal fees.260 

256 See the final report under the 5th meeting of ELTEG III. 
256 The Euro Legal Tender Experts Group convened 5 times in 2021 and 2022 and adopted its report in July 2022. 
257 See the final report under the 5th meeting of ELTEG III. 
258 ECB, Study on the payment attitudes of consumers in the euro area (SPACE) – 2022 – Consumer  
access to and acceptance of means of payment, p57. 
259 LV, FI, BE, MT, IE and EE reported a percentage point decrease of 5 points or higher in the change in the share of POS transactions 
where cash would be accepted. Most significantly, LV reports a decrease from 93% to 84% in acceptance, and FI from 94% to 85%, see 
ECB, Study on the payment attitudes of consumers in the euro area (SPACE) – 2022 – Consumer access to and acceptance of means of 
payment, p57.  
260 See also ‘’Guaranteeing freedom of payment choice: access to cash in the euro area’’, Alejandro Zamora-Pérez, Published as part of the 
ECB Economic Bulletin, Issue 5/2022. 

149 

 
 
                                                           
Analysing  the  cash  access  points  (bank  branches  +  ATM’s)  available  to  citizens  and 
businesses  is  key  to  assessing  access  to  cash  in  a  territory.  Chart  1  shows  the  number  of 
traditional cash access points (bank branches and ATMs) per 100,000 inhabitants in selected 
euro  area  countries,  from  2016  to  2020,  before  the  pandemic.  In  the  euro  area,  the  overall 
number  of  cash  access  points  is  starting  to  show  decreasing  trends,  although  trends  vary 
across Member States, confirming the heterogeneous situation on the ground. Although there 
seems to be a clear declining trend in the number of bank branches per 100,000 inhabitants 
on  average  in  the  euro  area,  this  is  partially  offset  by  the  number  of  ATMs  per  100,000 
inhabitants,  especially  in  some  countries  that  are  resisting  a  downsizing  of  their  ATM 
network  (e.g.  Germany)  or  even  increasing  it  (e.g.  Italy  and  Austria).  On  the  other  hand, 
Some Member States like the Netherlands and Belgium are clear examples of reductions in 
both  bank  branches  and  ATMs,  which  are  projected  to  continue  in  the  near  future.  For 
example, in Belgium, the number of ATMs is expected to decrease from 6912 (in 2020) to 
4037 (in 2025).261  Furthermore, the share of the population covered by cash access points is 
uneven  across  countries,  with  the  share  of  people  living  within  5  km  of  the  nearest  cash 
access  point  ranging  from  77%  in  the  country  with  the  lowest  coverage  to  100%  in  the 
country with highest coverage.262 Finally, the declining cash access point network can also be 
found  back  in  the  ECB  study  on  the  payment  attitudes  of  consumers  in  the  euro  area 
(SPACE), showing a doubling of the people that expressed concerns about access to ATMs 

261 PARLEMENT DE LA RÉGION DE BRUXELLES-CAPITALE PROPOSITION DE RÉSOLUTION demandant une juste répartition 
des distributeurs de billets au sein de la Région de Bruxelles-Capitale;  images.pdf (irisnet.be) 
262 https://www.ecb.europa.eu/pub/economic-bulletin/articles/2022/html/ecb.ebart202205_02~74b1fc0841.en.html 

150 

 
 
 
                                                           
between  2016  (when  only  5%  of  the  people  in  euro  area  were  not  satisfied  with  access  to 
ATMs) and 2022 (when 10% considered that access to an ATM is fairly or very difficult).263 

Content of a regulation on the legal tender of cash: codification and clarification of the 
jurisprudence pertaining to cash acceptance 

In  terms  of  the  content  of  a  possible  legislative  proposal  on  the  legal  tender  of  euro  cash, 
there  is  broad  support  from  all  euro  area  Member  States  that  its  baseline  should  be  the 
codification  of  the  case  law  of  the  Court  of  Justice  of  the  European  Union  on  the  key 
principles  of  legal  tender  as  set  out  above.  Furthermore,  the  analysis  undertaken  in  the 
context  of ELTEG, the  ELTEG principles set  out  in  the ELTEG  III  report and the targeted 
stakeholder consultation results also suggest that the following legal clarifications should be 
considered in  the legal  proposal  to  ensure added-value and legal  certainty whilst  respecting 
the Court of Justice jurisprudence.  

  A  non-exhaustive  specification  of  possible  exceptions  to  the  principle  of 
mandatory acceptance based on the ‘good faith’ principle. This list would seek to 
address  the  findings  of  ELTEG  III  that,  although  cash  acceptance  is  generally  still 
widespread  across  the  euro  area,  preventive  action,  such  as  a  further  definition  of 
justified exceptions, could be needed to avoid problems from evolving, as cash refusal 
could grow very quickly. Good faith exceptions, by their very nature, can be abused if 
they  are  applied  in  bad  faith,  but  this  does  not  limit  the  value  of  having  such 
exceptions  overall.  An  adequate  level  of  specification  of  these  exceptions  would 
therefore  limit  the  risk  of  moral  hazard,  whilst  at  the  same  time  leaving  necessary 
room  for  flexibility,  freedom  of  choice  and  case  by  case  basis  application,  the 
importance  of  which  was  emphasised  by  responding  merchant  and  financial 
institutions in the targeted stakeholder questionnaire.  

The  list  could  include  some  of  the  exceptions  already  stated  in  the  2010 
Recommendation  as  examples,  namely  if  the  value  of  the  banknote  tendered  is 
disproportionate compared to  the value of  the amount to be settled and if a retailer 
has no change available. As for the latter, given that there is the aforementioned risk 
that no change available could lead to a situation in which retailers will not make an 
effort to ensure sufficient change, it would need to be further specified. Therefore, the 
exception could  be further specified to  include  ‘in exceptional  cases,  if the business 
has  no  change  available  at  the  moment  were  the  cash  is  tendered  in  payment,  or  if 
there would be not enough change available as a result of that payment for a business 
to carry out its normal daily business transactions’. 

  A provision empowering the Commission to adopt by a delegated act additional 
exceptions  of  a  monetary  law nature  to  the  principle  of  mandatory  acceptance, 

263 https://www.ecb.europa.eu/stats/ecb_surveys/space/shared/pdf/ecb.spacereport202212~783ffdf46e.en.pdf 

151 

 
 
 
 
 
                                                           
insofar  as  they  are  justified  by  a  public  interest  objective  and  proportionate  to  that 
aim.;  

  A  provision  requiring  Member  States  to  monitor  cash  acceptance  levels  in  their 
territory  and  the  prevalence  of  unilateral  ex  ante  exclusions  of  cash  and  to  take 
measures  if  acceptance  of  cash  is  not  ensured.  These  cases  of  non-acceptance  erode, 
without  an  acceptable  justification,  the  capacity  of  consumers  to  pay  with  cash  and 
compromise the legal tender status of cash.  

Six  Member  States  (FR,  ES,  IT,  EE,  LU,  SI)  report  that  they  already  have  national 
provisions  penalising  refusal  of  payment  with  legal  tender  notes/coins.  Unilateral 
refusal  of  acceptance  can  entail  breaches  of  the  criminal  code  (FR,  LU),  the  Euro 
Introduction Act (SI), consumer protection acts (EE, ES), or the Civil Code (IT) and 
can  in  some  cases  lead  to  administrative  sanctions  and  fines  (ranging  from  30  to 
120.000  euro).  In  the  targeted  stakeholder  questionnaire,  all  5  responding  consumer 
organisations  (e.g.  BEUC)  and  all  4  responding  NGOs  are  of  the  opinion  that  there 
should be a provision for administrative sanctions for cash non-acceptance, which is 
instead opposed by 12 of 19 responding business associations (e.g. EuroCommerce) 
and 16 of 29 companies.  

Five Member States (FR, DE, IE, IT and NL) expressed concerns that a prohibition of 
ex-ante  unilateral  imposition  of  exclusion  by  retailers  in  physical  transactions  of 
payments in euro cash could interfere with national contract law. It could be perceived 
to  have  a  fundamental  rights  impact,  concerning  the  right  to  conduct  business,  and 
restricting  citizens/parties  to  a  contract  and  to  freely  agree  on  a  particular  payment 
method.  However,  this  rather  concerns  those  occasions  where  a  citizen/consumer 
would  not  be  able  to  freely  agree  on  a  payment  method,  as  the  method  of  cash 
payments  has  already  been  excluded  unilaterally  by  the  retailer,  so  these  occasions 
actually preclude parties from entering freely into a contract in the first place.  

These limited private restrictions on payment method by cash could evolve, because 
of  their  increasing  volume,  into  structural  restrictions  or  exclusions  of  cash 
acceptance. This makes it necessary and proportionate to introduce a requirement on 
Member  States  to  monitor  cash  acceptance  levels  and,  if  necessary,  to  take  the 
appropriate  measures    to  ensure  that  the  fundamental  legal  tender  principle  of 
mandatory  acceptance  is  not  undermined  by  widespread  cash  non-acceptance  levels 
through the unilateral and ex ante exclusion of cash by enterprises.. 

As the above matters relate to the scope, effects and exceptions to the key principles of legal 
tender which are covered in the jurisprudence of the Court, legislating on these matters would 
be  largely  a  matter  of  clarification  and  codification  in  the  interests  of  coherence  and  better 
law-making,  with  little  margin  for  policy  choice.  These  aspects  are  therefore  not  further 
assessed. 

152 

 
 
 
 
 
 
 
Content of an EU initiative on the legal tender of cash and access to cash 

While  the  issue  of  acceptance  of  cash  and  its  exceptions  is  covered  in  the  Court 
jurisprudence, issues concerning problems with access to cash have been raised by Member 
States and stakeholders and are not covered by the Court ruling. In order for cash to be used 
as  an  effective  means  of  payment,  access  to  various  cash  services  should  be  ensured,  in 
particular  cash  withdrawals  and  cash  deposits.  These  services  enable  cash  to  circulate 
between  different  actors  in  society.  By  extension,  the  willingness  and  ability  of  retailers  to 
accept cash is directly linked to the consumers’ use of cash as a payment means. This in turn 
requires  consumers  to  be  able  to  make  cash  withdrawals  from  their  accounts  with  the 
institutions,  whilst  it  is  also  necessary  for  retailers  to  be  able  to  access  deposit  services  in 
order to convert cash into funds held by institutions. It is through this system of withdrawals 
and deposits of the institutions that cash is mainly circulating in society.  Thus, ensuring the 
access to cash is a necessary pre-condition for the effectiveness of the legal tender of cash. 

If  access  to  cash  continues  to  decline,  cash  could  lose  its  role  as  an  effective  means  of 
payment. As a result, there is a risk that it will not be possible to ensure that everyone in the 
euro area has access to basic cash services at a reasonable price and distance, in particular for 
cash withdrawals and daily cash deposits. Such a development could pose serious problems 
for society at large, as it could lead to exclusion of vulnerable groups with a dependency on 
cash payments, as well as to the erosion and gradual loss of the status of cash as meaningful 
and  effective  legal  tender,  but  also  as  a  possible  contingency  payment  method  in  crisis 
situations. Moreover, it should be noted that cash is seen by many as a payment method with 
social  benefits,  providing  a  clear  overview  of  expenses,  with  high  degrees  of  ease  of  use, 
speed, safety and anonymity. Indeed, surveys also show that a majority of citizens in the euro 
area would still like to have the option to pay with cash, even if some of them report that they 
have a preference for digital means of payment in most cases. 

The  heterogeneous  reality  of  cash  access  on  the  ground  also  seems  to  result  in  a  divided 
opinion  on  whether  EU-level  action  on  access  is  warranted.  Nine  Member  States  (AT,  CY 
ES,  FR,  FI,  LV,  LT,  SK,  PT)  affirm  that  EU-level  action  to  protect  access  to  cash  is 
warranted, IE is not opposed to EU action, whilst eight Member States (BE, DE, EE, GR, IT, 
LU, MT, SI) do not feel EU-level action is warranted yet, with some of them urging caution 
in the light of important cross-country differences. Yet several Member States do emphasise 
that while action might not be acutely needed now, this could change as the situation could 
evolve relatively rapidly in the future. Moreover, the results of the stakeholder consultation 
confirm  wide  support  for  a  provision  which  aims  to  guarantee  the  access  to  cash  by  a 
majority  of  respondents  in  most  stakeholder  groups  (11  of  19  responding  business 
associations,  21  of  31  companies,  all  5  consumer  organisations  and  all  5  NGOs).  These 
respondents considered that adequate availability of cash should be maintained especially for 
the people who use only cash for payments, and that merchants should not be legally obliged 
to  issue  cash  to  citizens  (no  default  cash  back  obligation).  The  majority  of  responding 
financial institutions, did not support the suggested provision. In general, their views are that 
the access to cash should be the responsibility of the Member States. 

The  discussions  with  Member  States  experts  in  ELTEG  III  show  that  the  main  types  of 
actions  needed  to  address  issues  with  regard  to  access  to  cash  concern  requirements  for 

153 

 
 
banks,  recommendations  for  non-banks  and  monitoring  of  ATM  coverage.  These  actions 
could in principle be addressed in one of two ways, as set out below. 

Option 1(b-c)i: A soft law instrument (e.g. a Commission Recommendation)  

Option  1(b-c)ii:  A legally  binding obligation on Member States in  the proposed Regulation 
on legal tender of cash to be implemented by Member States 

As explained in the analysis of the impacts of the above options in chapter 6 of the  Impact 
Assessment,  option  1(b-c)ii  forms  the  preferred  option,  both  in  terms  of  effectiveness  and 
legal coherence. The proposed Regulation would provide for a legally binding obligation on 
Member  States  to  ensure  sufficient  and  effective  access  to  cash  To  comply  with  this 
obligation,  Member  States  would  be  required  to  designate  one  or  more  competent  national 
authorities  with  oversight  and  regulatory  powers  over  the  market  activities  of  the  cash 
industry, which could be an existing authority such as the national central bank. This duty of 
the Member States to assign one or more national competent authorities (i.e. the central bank) 
with  oversight  and  regulatory  powers  over  the  market  activities  of  the  cash  industry 
(including  credit  institutions)  would  be  key  to  ensure  an  effective  and  sustainable  system. 
This  would  give  these  institutions  the  authority  to  set  up  information  duties,  guiding 
principles  and  codes  of  practice  as  well  as  to  eventually  require  or  prohibit  certain  actions 
taken by cash providers in order to guarantee sufficient access to cash if deemed necessary. 

In  order  to  assess  whether  access  to  cash  is  ensured,  these  designated  national  competent 
authorities  would  be  obligated  to  monitor  access  to  cash  on  the  basis  of  a  set  of  common 
indicators. To this end, the Commission would be able to adopt an implementing act in order 
to  specify  a  set  of  common  indicators,  which  will  allow  the  Member  States  to  assess  the 
access to cash in their territory and in all their different regions and urban areas. Indeed, this 
would respond to  the  concern raised by some stakeholders264, that there is  a need for more 
detailed  measurement  indicators  that  can  more  accurately  and  granularly  measure  the  cash 
access situation on the ground. The standard measurement of the number ATM’s per x people 
or x km2 does not always fully and sufficiently highlight potential access problems as there 
are  many  other  factors  that  affect  access,  such  as  withdrawal/deposit  fees,  the  existence  of 
different  networks  with  different  access  modalities  for  customers,  urban-rural  and  socio-
economic  variations,  and  access  difficulties  for  certain  population  groups.265  Therefore,  the 
Commission  and  Member  State  authorities  should  cooperate  and  aim  to  define  the 
appropriate  common  indicators  taking  into  account  the  various  national  and  regional 
modalities of the ATM/cash service point network, to be able to measure and monitor overall 
cash  access  on  the  ground  more  accurately.  Thereby  it  would  allow  the  Member  States  to 
then define the appropriate measures to guarantee sufficient and effective cash access. These 
indicators  would  also  allow  them  to  assess  the  vulnerability  of  access  to  cash  and  the 
robustness  of the current network of bank branches and ATMs  in  order to anticipate which 
measures might need to be taken in the future.  

264 This concern was raised by several stakeholders in the context of ELTEG, as well as by one consumer organisation. 
265 See ‘’Guaranteeing freedom of payment choice: access to cash in the euro area’’, Alejandro Zamora-Pérez, Published as part of the ECB 
Economic Bulletin, Issue 5/2022. 

154 

 
 
                                                           
The Member States would have to notify the results of their monitoring and analysis of the 
situation as regards access to cash in an annual report to be addressed to the Commission and 
the European Central Bank. This report should assess whether there is sufficient and effective 
access  to  cash  throughout  the  national  territory  and  in  all  regions  and  urban  areas,  giving 
grounds  and  objective  data  for  its  assessment.  If  a  Member  State  concludes  that  access  to 
cash  is  sufficient  and  effective,  it  would  not  be  required  to  take  action.  Conversely,  if  a 
Member State concludes that access to cash is not sufficient and effective in all or part of its 
territory,  or  is  at  risk  of  deteriorating  in  the  absence  of  action,  appropriate  measures,  to  be 
specified  by  the  Member  State,  would  have  to  be  taken  to  remedy  the  situation.  These 
measures could include the setting of geographic access requirements on credit institutions to 
maintain  cash  services  at  a  sufficient  number  of  their  branch  offices  where  they  conduct 
business, or through an appointed agent for online only credit institutions, and/or maintain a 
sufficient  density  of  ATMs  where  they  conduct  business  taking  into  account  a  good 
geographic  spread  in  relation  to  population.266    Member  States  could  also  designate  those 
cash  providers  that  would  be  within  the  scope  of  the  aforementioned  cash  access 
requirements (such as the requirement to continue providing adequate access to deposit and 
withdrawal facilities), so that the requirements can be targeted at the largest and most spread 
out  payment  account  providers  and  can  be  proportionately  applied.  In  addition, 
recommendations could be issued for those cash service providers that would not fall within 
the cash access requirements (i.e. independent ATM operators and retailers that provide cash-
back services), encouraging these actors to complement the cash services of banks. Further, 
post offices have traditionally had an important role when ensuring access to cash through its 
branch  network  enshrined  in  the  national  law  in  several  Member  States.  This  role  may  be 
strengthened  by  the  Member  States  concerned,  following  their  assessment  of  adequate 
number of cash  access  points.  As the ELTEG  III final  report notes, solutions  such as cash-
back  and  cash-in-shop  services  need  to  be  considered  to  provide  for  a  comprehensive 
provision of cash services. These solutions, however, do not relieve banks from their social 
role  to  provide  adequate  cash  services  to  citizens  and  business  customers,  with  the  needed 
geographical coverage. The provision of cash services by merchants  and other non-banking 
entities  would  remain  voluntary,  based  on  their  own  business  decisions  and  profit  models. 
These other channels for cash withdrawals and deposits outside the banking sector are mainly 
to  be  seen  as  making  access  to  cash  more  convenient  and  easier  for  consumers.  Other 
measures could include a regulation of fees, if necessary.267  

Finally,  the  proposed  Regulation  could  provide  that  if  Member  States  deem  necessary  to 
adopt  remedial  measures  such  as  those  indicated  above  in  order  to  ensure  sufficient  and 
effective access to cash, they should notify them to the Commission and ECB on an annual 
basis, before they  are  adopted. Then, the Commission  would examine the annual  reports in 
close  consultation  with  the  European  Central  Bank.  The  Commission  and  the  European 
Central  Bank  would  have  the  possibility  to  review  these  measures,  to  make  sure  that  they 

266 See also ‘’Guaranteeing freedom of payment choice: access to cash in the euro area’’, Alejandro Zamora-Pérez, Published as part of the 
ECB Economic Bulletin, Issue 5/2022. 
267 See ‘’Guaranteeing freedom of payment choice: access to cash in the euro area’’, Alejandro Zamora-Pérez, Published as part of the ECB 
Economic Bulletin, Issue 5/2022. 

155 

 
 
                                                           
correspond  to  the  basic  requirement  of  ensuring  access  to  euro  cash  and  respect  the 
effectiveness of its legal tender and -if needed- to provide comments, and also to take stock 
of the measures in place on an EU-wide level. If the measures proposed by a Member State 
appear insufficient, or if the Commission considers that access to cash in a Member State is 
not sufficient in spite of the findings of the annual report, the Commission would be able to 
adopt implementing acts providing for adequate and proportionate measures that need to be 
adopted by the Member State concerned.  

Conclusion 

In  light  of  the  above,  given  the  EU’s  exclusive  competence  for  monetary  law  and  in  the 
interests  of  legal  certainty  and  better  law-making,  the  Commission  should  bring  forward  a 
proposal for a regulation based on Article 133 TFEU to regulate the scope and effects of, and 
access  to,  the  legal  tender  of  euro  cash,  to  ensure  coherence  with  the  preferred  option  to 
regulate  the  legal  tender  status  for  the  digital  euro.  The  legal  tender  of  euro  cash  proposal 
should be made by the Commission at the same time so that it can be considered by the co-
legislators  in  parallel.  Moreover,  the  level  of  detail  provided  in  the  regulation  of  the  legal 
tender  status  of  the  digital  euro  and  euro  cash  should  aim  to  be  broadly  consistent  and 
coherent  with  another.  The  Regulations  do  not  need  to  be  identical,  since  the  concrete 
implementation of the key principles of legal tender can differ for physical and digital forms 
of money (e.g., the availability of change is not applicable in a digital context), but a level of 
parallelism is preferable for the sake of clarity and consistency. 

156 

 
 
 
 
 
Annex 8 - Payments in web 3.0 and industry 4.0; the need for 
“conditional payments”; stable coins  

1 The next stage in the development of the internet 

This Annex offers an overview of the key steps in the historical unfolding of the World Wide 
Web, leading to web 3, insights on future trends like the “Internet of Senses”, as well as on 
the related payments need of industrial ecosystem transitioning towards a tokenised economy. 
Such needs could be fulfilled in several ways, and public money such as CBDCs could play a 
pioneering  role  in  providing  use  cases  catering  for  the  emerging  needs  of  citizens  and 
businesses. 

Technology-enabled changes drive profound changes in our economy, society and daily lives. 
Applications  of  emerging  technologies  such  as  artificial  intelligence  and  machine  learning, 
big data, data automation and robotics are driving competitiveness and productivity, allowing 
for the provision of goods and services  which seemed unimaginable just a decade ago. The 
online behaviour of users has also been revolutionised accordingly, entailing new user needs 
in the online economy, particularly in terms of payments solutions. 

The digital transition entails transformations in the way in which the World Wide Web itself 
is organised. The evolution of the internet has been labelled according to the functionalities 
offered online, the products and services marketed with the underlying business models, and 
the way users interact  with each other. Experts have classified the  evolution  of the internet 
into successive phases, or waves, as presented in the illustration in Figure 1.  

Figure 1 – Evolution of the internet 

Source: ART – Analysis and research team, Council of the EU, March 2022 

The first step of World Wide Web evolution was represented by web 1 from the early 90s, 
consisting  mainly  of  static  web  pages  and  local  storage,  which  could  be  reached  and 
consulted  by  typing  in  the  page  URL  or  through  a  browser  and  search  engine.  After  more 
than a decade, in the mid-2000s, the evolutions of web 2 unfolded, made of interactive pages 

157 

 
 
 
embedded  in  mobile  computing  and  cloud,  which  tiered  down  distribution  costs  allowing 
global sharing of user-generated contents. Such transition entailed a paradigm shift towards 
an  enhanced  participatory  culture,  with  the  modelling  of  social  networking  and  virtual 
communities.  However,  the  access  to  online  content,  and  the  data  harvesting  linked  to  the 
transaction remained often controlled by or through centralised intermediaries/platforms. 

The 2020s are widely considered as a turning point in the evolution of the internet, with the 
emergence of web 3, which uses a stack of technologies, for example based on decentralized 
blockchains that enable new business and social models. Web 3 consists of a new trust model 
in exchanges among users, for it enables peer-to-peer interactions transferring value without 
centralized  platforms  and  intermediaries.  It  is  a  transition  to  more  decentralised  internet,  in 
connection  with  the  decentralisation  of  data  storage  (edge  computing,  increase  of  data), 
where  participants  in  the  web  have  a  greater  degree  of  power  and  control  over  their 
interactions268.  Users  own  their  data,  identity,  content  and  algorithms  and  participate  as 
“shareholders” in this new economic model by owning digital assets. 

Looking  ahead  at  the  next  decades,  experts  look  at  the  evolutions  of  the  newly  established 
web 3 paradigm, imagining a future internet enabled by new technologies like 6G, building 
on  technical  advancements  such  as  3D  videos  in  the  form  of  virtual  reality.  Visual,  audio, 
haptic, and other technologies allow human beings to have digital sensory experiences similar 
to the ones we experience in the physical world. It is the “Internet of Senses” or “Internet of 
Touch”, constituted of multisensory experiences transmitted over future network, delivering 
virtual  experiences  which  are  almost  inseparable  from  reality.  Some  companies  claim  they 
have  started  work  on  a  next  generation  of  an  immersive  internet  made  of  multisensorial 
digital experiences269. 

2 Immersive experiences in the Metaverse 

In connection with the paradigm shift represented by the “Internet of Senses” announced in 
connection with 6G technology, the public debate is characterised by an emphasis on the so-
called “Metaverse”:  the space where virtual  and physical  reality merge. The Metaverse is  a 
digital virtual world, mapping the real world and becoming more and more real, allowing for 
immersive  audio-visual  experience.  The  development  of 
the  Metaverse  relies  on 
technological developments such as virtual and augmented realities (AR/VE), head-mounted 
displays  (HMDs),  blockchain,  5G  and  6G,  cloud,  AI,  Internet  of  Things  (IoT),  and  a 
continuing  increase  in  computing  power.  This  increase,  allowed  by  next  generation  of 
supercomputers,  is  not  only  about  greater  processing  volume  in  terms  of  operations  per 
second, but it is also about qualitative changes in the way data are processed, with graphics 
chip developments at the forefront of this accelerated innovation. 

The Metaverse is the product of converging trends in a decentralised economy, the expansion 
of digital social life, rapidly expanding technical capacity and massive investment from key 
players.  The  Metaverse  has  become  a  new  macro-goal  of  world  tech  giants.  Major  tech 
companies  are  scaling  up  their  metaverse  activities,  including  through  mergers  and 
acquisitions. It has been estimated that by 2026, 25% of the population will spend at least one 
hour  a  day  in  the  Metaverse  for  work,  shopping,  education,  social  interaction  and 
entertainment270.  The  word  ‘Metaverse’  is  composed  of  ‘meta’  (beyond)  plus  ‘universe’,  a 

268 See Gartner “What is Web3”. https://www.gartner.com/en/articles/what-is-web3. 
269 The company Ericcson argues that “the Internet of Senses will transform our digital experiences to fully immersive by making them 
multisensory”. https://www.ericsson.com/en/6g/internet-of-senses 
270 See forecasts from Gartner https://www.gartner.com/en/newsroom/press-releases/2022-02-07-gartner-predicts-25-percent-of-people-will-
spend-at-least-one-hour-per-day-in-the-metaverse-by-2026 

158 

 
 
                                                           
label  “Metaverse”  being  increasingly  used  by  various  companies  trying  to  reap  the 
opportunities of this evolution, such as Microsoft or Walmart in their initiatives271, or such as 
Facebook which rebranded to  Meta272. The Metaverse could  become the next generation of 
the Internet over the next 20 years, involving new immersive forms of entertainment, social 
interaction, playing games, and holding business meetings.  The current consensus is that the 
including  network  and  computing 
Metaverse  requires  six  supporting 
technologies, 
technologies,  AI 
their  underlying 
technologies  with 
technologies,  and  blockchain 
architecture, to which we will dedicate the next sections of the Annex. 

In the Metaverse, users share a collective virtual shared space, created by the convergence of 
virtually enhanced physical and digital reality273. People would interact by means of an avatar 
to  carry  out  a  wide  range  of  activities,  from  leisure  and  gaming  to  professional  and 
commercial interactions, financial transaction or event health consultation and interventions. 
Though the specific characteristics of the Metaverse are difficult to predict, its core attributes 
can be identified as in the visual in Figure 2. 

Figure 2 – Core attributes of the Metaverse. 

Source: ART – Analysis and research team, Council of the EU, March 2022 

The  impact  of  these  developments  is  difficult  to  predict  and  probably  is  not  limited  to  the 
virtual  world,  but  could  also  affect  employment,  education,  healthcare,  economic 
development  as  well  as  political  influence  in  the  real  world.  Recent  research  papers  were 
issued by the Research Service of the European Parliament274 and by the Research Team of 
the Council275 to provide an overview of the main characteristics of the Metaverse, as well as 
the key policy risks stemming from it.  

271 https://www.cnbc.com/2022/01/16/walmart-is-quietly-preparing-to-enter-the-metaverse.html 
272 https://about.fb.com/news/2021/10/facebook-company-is-now-meta/ 
273 Gartner https://www.gartner.com/en/newsroom/press-releases/2022-02-07-gartner-predicts-25-percent-of-people-will-spend-at-least-one-
hour-per-day-in-the-metaverse-by-2026 
274 Metaverse: opportunities, risks and policy implications, ERPS – European Parliament Research Service, June 2022. 
https://www.europarl.europa.eu/RegData/etudes/BRIE/2022/733557/EPRS_BRI(2022)733557_EN.pdf 
275 Metaverse: – virtual world, real challenges, ART – Analysis and research team (General Secretariat of the Council of the EU), March 
2022. https://www.consilium.europa.eu/media/54987/metaverse-paper-9-march-2022.pdf 

159 

 
 
 
                                                           
The metaverse will impact every business that consumers interact with every day. Enabled by 
virtual  reality  (VR)  and  accessed  with  VR  headsets  or  similar  devices,  the  Metaverse  is 
persistent,  providing  enhanced  immersive  experiences.  The  Metaverse  is  expected  to 
constitute a virtual economy enabled by digital  currencies and non-fungible tokens (NFTs): 
businesses  will  revert  to  such  instruments  to  commercialise  experiences  as  unique  digital 
assets. Consequently, the Metaverse will require new forms of frictionless payment tools to 
allow users to consume such immersive audiovisual experiences. 

Audiovisual  experiences  are  intensifying  only  if  they  are  scarce.  To  satisfy  users’  needs  in 
that  context,  means  of  payments  need  to  be  blockchain-native,  or  interoperable  with 
blockchain.  As  will be set  out  hereunder, these technologies enable businesses to  distribute 
content in a digital format that is unique. Audiovisual content that is unique has an intrinsic 
value  that  can  be  marketed.  And  to  market  this  audiovisual  content  in  the  Metaverse,  that 
content  must  be  paid  in  a  form  that  is  frictionless.    It  is  in  this  context  that  the  important 
policy question arises whether public money or only forms of private money should become a 
means  of  payment  in  the  Metaverse.  This  has  implications  both  for  market  stability  and 
privacy.  

We  have  examined  the  developments  of  internet  and  the  emerging  needs  in  the  Metaverse, 
which will require new forms of payments offering frictionless functions  through payments 
means  that  allow  for  scarcity.  We  now  move  to  analyse  payments  need  from  and  industry 
perspective, with a focus on conditional payments and smart contracts. 

3 Industrial ecosystems towards a tokenised economy 

The  transition  to  a  digital  economy  in  the  European  Union  evolves  jointly  with  the 
development  of  industry  4.0,  which  conceptualises  the  rapid  transformation  of  industrial 
ecosystems  based  on  the  advanced  application  and  integration  of  information  and 
communication  technologies  in  product  life  cycles  (design,  manufacturing,  operation  and 
service).  The  objective  is  to  digitally  connect  all  elements  in  and  around  manufacturing 
operations as well as the services needed for them, including suppliers, the plant, distributors, 
and  even  the  product  itself.  Bringing  digital  and  physical  systems  together  provides  highly 
integrated  value  chains  with  emphasis  on  interconnectivity,  automation,  machine  learning, 
and real-time data.  

Enhanced  interoperability  between  different  technologies  and  convergence  between  the 
Internet  of  Things  (IoT)  and  value  systems  is  an  enabler  for  innovative,  competitive  and 
integrative  business  models  for  companies  of  all  sizes,  including  SMEs.  Specifically 
regarding finance, digitalisation offers innovative payment solutions by means of transaction 
through smart devices or wearables, triggered e.g. by biometrics and voice commands. It also 
enables investors, including retail investors, to provide finance to entrepreneurs more flexibly 
and faster by better matching supply and demand for capital based on crypto-assets. 

Industry  4.0  will  unleash  its  full  potential  with  the  rise  of  a  machine-to-machine  (M2M) 
economy,  where  machines  and  sensors  autonomously  transfer  data  and  lead  production 
processes without human interaction based on digital infrastructures and smart contracts. The 
increased automation of payments processes improves efficiency while reducing human error 
and  lowering  operational  risk.  In  particular,  M2M  payments  introduce  automated  actions 
performed  entirely  between  machines.  This  creates  new  business  models  and  use  cases, 
which go much beyond increases in productivity or cost savings. For example, autonomous 
vehicles, such as cars or trucks, or other industrial machines could pay for their own energy, 
maintenance  and  insurance  and  accept  payments  for  their  services.  Moreover,  automated 
M2M  transactions  are  a  major  step  to  generate  real-life  data  insights.  Pay-per-use  business 

160 

 
 
models  will  make  short-term  rental  of  capital-intensive  goods  profitable  and  thus  help 
optimise the use of the capital stock in the EU.  

The  increased  digitalisation  of  sectors  such  as  manufacturing  and  energy  through  IoT 
applications  brings  opportunities  for  machines  paying  for  goods  and  services  under 
instructions  by  their  owners.  Machines  will  be  enabled  to  execute  routine  payment 
transactions themselves,  without seeking human intervention each time a  payment  is  made. 
Autonomous  electric  cars  will  be  enabled  to  rent  out  battery  capacity  to  grid  operators  for 
storing  overflow  electricity  in  power  grids  at  times  of  overproduction  (solar  /  wind).  They 
will also be enabled to source electricity from the cheapest renewable provider when docking 
to  general-purpose  loading  stations.  Manufacturing  machines  will  be  enabled  to  detect 
malfunctioning  and  act  on  it,  e.g.  by  ordering  their  own  spare  parts.  Algorithms  in  supply 
chains can be enabled to transfer micropayments for renting sensors or to insure cargo by the 
mile driven.   

The  EU  will  therefore  need  payment  solutions  that  give  industry  high  flexibility  for 
programming  use  case-specific  payment  logic.  From  a  conceptual  perspective,  there  are 
consistent requirements for digital value transfer solutions in order to reap the benefits these 
opportunities  offer.  Industrial  ecosystems  and  their  industry  4.0/M2M  use  cases  depend  on 
solutions that have four main characteristics: 

1.  They must allow for micropayments, i.e. the possibility to pay in fractions of a cent; 
2.  The speed in which transfers of value are executed and finalised must be maximised, 

with virtually zero delays to allow for immediate settlement; 

3.  The  safety  and  integrity  of  value  transfers  must  be  optimised,  with  no  exposure  to 

systemic risk inherent in centralistic structures; and 

4.  Machines, autonomous organisations etc. need to possess digital identities as a basis 

for digital wallet-based autonomous transactions. 

Conditional payments would address all four requirements in a consistent manner. 

4Conditional payments 

The  evolving  needs  in  industry  4.0  and  in  web  3  may  necessitate  changes  in  the  current 
payments  landscape  and  require  both  new  innovative  payment  means  and  payment 
infrastructures,  which  are  challenged  in  their  core  structures  and  business  models.  In 
particular, the cash flow associated with digital settlements will need to reflect the emerging 
innovation  trends  and  as  such  it  should  be  synchronised  with  flows  of  services.  One 
innovation that can play a significant role in the future of the digital economy is the combined 
use of smart  contracts  and Distributed  Ledgers. Together, these technologies allow for new 
advanced forms of digital money enabled by software, which the user can program to follow 
an inherent logic for a predefined purpose, based on the attributes of the digital money itself: 
in  short,  “conditional  payments”.  Conditional  payments  are  transfers  of  money  for  which 
conditions  are  specified  in  advance,  and  not  set  ad  hoc  during  the  payment  process.  The 
general  requirements  for  conditional  payments  are  interoperability,  ability  to  innovate,  and 
mitigation of cyber risks and data protection. 

Decentralised  Ledger  Technologies  (DLT)  are  technologies  with  distributed  forms  of 
governance  that  serve  the  maintenance  of  electronic  ledgers  without  a  central  entity  that 
verifies  payment  claims.    Since  2014,  these  technologies  also  combine,  in  different  forms, 
software  that  serves  the  automated  execution  of  payment  transactions,  so-called  “smart 
contracts”: computer programs operating on DLT. Their execution automatically binds two or 
more  parties  based  on  previously  determined  parameters.  The  term  “contracts”  is  not  to  be 

161 

 
 
understood in a legal sense. While "smart contracts” may under specific conditions meet the 
civil law requirements of a contract between two parties, which is often not the case. In many 
instances  smart  contracts  simply  execute  arrangements  that  two  parties  have  concluded 
previously. For more information, see the definition of “smart contract” provided in Annex 5 
“Technical glossary”. 

Research on “executable contracts” can be traced back to the mid-80s276 and early 90s277. In 
1997278,  the  term  “smart  contract”  was  used  to  refer  to  contract  that  can  be  converted  into 
computer code and executed. The decisive step in the evolution of smart contract happened 
only  in  2008,  after  the  publication  of  the  Bitcoin  paper  by  Satoshi  Nakamoto,279  and  the 
Etherium  white  paper  in  2014.280  The  term  "smart  contract"  took  off  when  Vitalik  Buterin 
extensively used the term in order to show the advantages of Ethereum. After that the term 
has became well known. 

The traditional centralised approach to payment verification, based on contributors and users 
interacting via business platforms, can be complemented by an alternative approach based on 
the  distributed  solution  that  Distributed  Ledgers  and  smart  contracts  jointly  offer,  where 
contributors and users interact within “thing to thing networks”281. The core function of smart 
contracts  using  blockchain  as  platform  is  to  capture  contractual  agreements  as  soon  as  the 
predefined  conditions  are  fulfilled282.  Blockchain  is  instrumental  for  the  execution  of  smart 
contracts  since  it  is  a  distributer  ledger  that  is  able  to  efficiently  record  transaction  in  a 
permanent  way  (resistant  to  modifications  of  data).  Through  blockchain,  the  contractual 
agreement  agreed  by  both  parties  is  able  to  take  place  independently  and  without  human 
intervention.  In  summary,  smart  contracts  using  blockchain  are  characterises  by  self-
execution,  immutability,  and  digital  performance283.  The  advantages  of  smart  contracts  are 
increased speed and safety, traceability, as well as reduction of costs and operational risks. 

Traditional payment technologies can also enable the “programmability” of payments. These 
solutions  rely  on  Application  Programming  Interfaces  (APIs)  which  connect  software  to  a 
centrally controlled database. Such solutions enable programmability through an API layer on 
top  of  some  combination  of  underlying  technology.  In  fintech  payment  solutions  such  as 
Paypal, for instance, customers are using an interface of Paypal that allows of P2P payments 
between  individuals,  Paypal  authorises  the  transaction  after  verifying  the  credentials  of  a 
payer and then connects through an API to the payer’s bank account or credit card account. 
Beyond a fair amount of flexibility, benefits of APIs include established design patterns and 
general  familiarity  among  system  developers,  which  may  not  be  the  case  with  newer 
technologies  associated  with  DLT284.  However,  because  the  API  is  an  abstraction  of  the 
system that it provides an interface for, DLT could in fact be used behind an API as well. The 
use  of  traditional  payment  infrastructures  for  payment  automation  has  a  fundamental 

276  See  N.  H.  Minsky  and  A.  D.  Lockman,  “Ensuring  integrity  by  adding obligations  to privileges,”  in  Proc.  8th  Int’l  Conf.  on  Software 
Engineering, 1985, pp. 92–102. 
277 See L. F. Marshall, “Representing management policy using contract objects,” in Proc. IEEE First Int’l Workshop on Systems 
Management, 1993, pp. 27–30. 
278 N. Szabo, “Smart contracts: Formalizing and securing relationships on public networks,” First Monday, vol. 2, no. 9, Sep. 1997. 
279 S. Nakamoto, “Bitcoin: A peer-to-peer electronic cash system,” http://nakamotoinstitute.org/ 
bitcoin/. 
280 https://ethereum.org/en/whitepaper/ 
281 See C. Molina-Jimenez, E. Solaiman, I. Sfyrakis, I. Ng, J. Crowcroft, On and Off-Blockchain Enforcement of Smart Contracts, in Euro-
Par 2018 International Workshops, Turin, 2018, pp. 342-354. 
282 See E. Karen, C. Levy, “Book-smart, not street-smart: blockchain-based smart contracts and the social workings of law, Engaging 
Science, Technology, and Society, 2017. 
283 See G. Dobrauz-Saldapenna and M. A. Schrackmann, “Economics of smart contracts: efficiency and legal challenges”, in 
Disintermediation economics: the impact of blockchain on markets and policies, Palgrave Macmillan, 2021, pp. 33-45. 
284 See FEDS Notes – Board of Governors of the Federal Reserve System, What is programmable money?, June 2021. 

162 

 
 
                                                           
downside. Namely, the payments leg and the settlement leg of a transaction remain separated. 
For example, payer A initiates a payment by sending an order to Paypal to transfer funds to 
payee B. That order is not directly settled on the bank account of either payer A or payee B. 
rather,  Paypal  as  middleman  stands  in  between  A  and  B  as  intermediation  platform  and 
absorbs  a  settlement  risk.  If  the  payer’s  credit  card  company  cannot  honour  the  payment, 
(e.g.:  upon  verification  payer  A  exceeded  a  credit  limit),  Paypal  incurs  a  loss  after 
transferring funds to payee B. For bearing such a risk and for handling transactions with two 
banks of A and B, Paypal earns a fee.  

In industry 4.0 and web  3 applications, this intermediated payment  solution is  unsatisfying. 
Distributed Ledger and smart contracts allow companies to create digital twins for machines, 
robots,  intellectual  property  rights.  This  process,  also  referred  to  as  the  “tokenisation  of 
assets”, leads to the creation of a fungible or non-fungible token that owners can transfer or 
rent, entirely or in part, to others. Tokenization is the process of converting rights – or a unit 
of asset ownership – into a digital token on a blockchain. Key benefits of tokenization include 
increased  liquidity,  faster  settlement,  lower  costs  and  bolstered  risk  management.  One 
example  for  this  trend  can  be  found  in  capital  markets  where  basic  types  of  securities  are 
being tokenised to facilitate their issuance and remittance.  

Significant efficiencies can be reaped if not only the asset (security, a machine, an intellectual 
property  right)  but  also  the  payment  instrument  (a  digital  euro)  are  “tokenised”.  In  this 
hypothesis,  it  would  no  longer  be  necessary  to  rely  on  a  middleman  like  Paypal  to  act  as 
intermediary  between  payer  and  payee285.  Then,  it  would  be  possible  to  program  a  “smart 
contract”  to  release  in  the  same  second  the  digital  (“tokenised”)  payment  instrument  as 
ownership over the ("tokenised”) digital asset is being transferred. This “automatic swap” of 
tokenised  asset  against  tokenised  payment  instrument  would  help  payer  A  and  payer  B  to 
save the intermediation fee of the middleman and eliminate counterparty risks involved in the 
traditional staggered approach.  

Importantly, this can only work if both payer A and payee B have certainty that the “smart 
contract”  will  actually  release  tokenised  asset  against  tokenised  payment  instrument.    The 
terms of the transfer must be guaranteed such that none of the two parties could unilaterally 
alter them after A and B have  agreed on the transfer. This “immutability” of the agreement 
can be achieved by recording the “smart contract” into a Distributed Ledger. That integration 
creates a  cryptographic  guarantee which none of the two parties can break on its own. The 
contract  remains  immutable,  unless  –  hypothetically  –  one  of  the  parties  were  able  to 
convince a majority consensus of all server operators maintaining the distributed network to 
change,  retrospectively,  the  smart  contract  in  a  block  of  the  Distributed  Ledger.    This 
embedding of the code into a DLT is illustrated in the figure below. 

285 The absence of a middleman is also one of the key characteristics of the set of transformation in the world wide web known as web 3. See 
Annex 8 on the evolution of the internet and payment needs of industry 4.0. 

163 

 
 
                                                           
Source:  FEDS  Notes  –  Board  of  Governors  of  the  Federal  Reserve  System,  What  is 
conditional money? June 2021. 

It is important to highlight that “conditional payments” can be configured in different ways, 
for  there  are  different  approaches  to  implement  smart  contracts  ranging  from  centralised  to 
decentralised.  Research  has  shown  the  advantages  and  disadvantages  of  these  approaches, 
indicating the benefits of hybrid solutions, which combine the centralised and decentralised 
approaches286.  Centralised  and  decentralised  (or  distributed)  approaches  to  smart  contracts 
can  be  distinguished  depending  on  the  number  of  instances  (copies)  of  the  smart  contract 
employed to monitor and enforce the contract. A centralised approach involves, for example, 
a centralised application that uses a single instance of the smart contract, relying on a single 
node provided by a trusted third party. Centralised approaches are relatively simpler, but they 
entail disadvantages as they display a single point of failure and they presuppose the trust in a 
trusted third party. Conversely, decentralised approaches rely on a set of untrusted nodes that 
are  used  to  run  several  identical  instances  of  the  smart  contract.  Though  decentralised 
approaches do not need a node by a trusted third party, they need to run a consensus protocol 
to  verify  that  a  given  operation  has  been  executed  correctly,  and  to  keep  the  states  of  the 
instances  identical.  In  many  cases,  the  decentralised  approach  is  made  unsuitable  due  to 
excessive  cost  of  the  protocol  used,  in  terms  of  computational,  communication  and 
performance degradation costs287. Decentralised approached were originally  conceived after 
the  2008  Bitcoin  paper  by  Satoshi  Nakamoto,  who  demonstrated  they  were  possible. 
Blockchain  technologies  offer  promising  features  to  implementing  smart  contracts  as 
decentralised. However, there is a large class of applications where blockchain is inadequate 

286 See C. Molina-Jimenez, E. Solaiman, I. Sfyrakis, I. Ng, J. Crowcroft, On and Off-Blockchain Enforcement of Smart Contracts, in Euro-
Par 2018 International Workshops, Turin, 2018, pp. 342-354. 
287 Ibidem. 

164 

 
 
 
                                                           
due  to  performance,  scalability,  and  consistency  requirements,  and  also  due  to  language 
expressiveness and cost issues that are hard to solve288. 

This  concept  of  “conditional  payments”,  nurtured  in  the  decentralised  space,  could  also  be 
considered  in  realising  a  Central  Bank  Digital  Currency  (CBDC).  For  instance,  Sveriges 
Riksbank, the Bank of Sweden has taken the decision of issuing e-krona, starting a pilot to 
test  technical  functionality  already  in  2020,  and  developing  phase  2289  of  the  project  from 
February 2021 to May 2022. Phase 2 of the project investigated whether and how an e-krona 
might function off-line, whether the performance of the tested solution is adequate, and how 
banks and other payment service providers could be integrated into an e-krona network. The 
e-krona project has now entered phase 3, which includes technical work focused on the area 
of  conditional  payments,  as  announced  in  the  report  issued  on  April  2022290.  Phase  3  will 
continue to test specific parts of the technical solution, but also focus on preparing the vision 
and  requirements  for  an  issuable  e-krona.  It  will  explore  how  conditional  solutions  can  be 
used to create new payment services, and how they would be more effective than traditional 
technologies. Bank of Sweden aims at allowing for market participants to create innovation 
without the central bank as issuer of the e-krona to be directly involved. 

5Private vs public solutions 

In  the  previous  section,  a  comparison  has  been  conducted  between  traditional  payment 
solutions  building  on  APIs  and  innovative  solutions  based  on  DLT/smart  contracts.  Both 
solutions – traditional and innovative – can be developed by the private sector, or the public 
sector, or a combination of the two. Some commentators have highlighted that public-private 
collaboration  is  arguably  the  most  advantageous  way  to  reap  the  benefit  of  conditional 
payments291.  The  current  section  analyses  the  key  characteristics  of  private  and  public 
solutions, including advantages and disadvantages, describing different governance structures 
to achieve conditional payments functions. 

Traditional  solutions  are  based  on  conventional  settlements  using  existing  payment 
instruments, such as direct debit, credit transfer or instant payment, which require payers and 
payees  to  be  known  to  each  other  and  addressable  via  IBAN.  They  allow  for  simple 
programmability  requirements  to  be  met,  as  they  only  require  timely  execution  without 
having to meet complex conditions. Innovative solutions include conditional payments such 
as  M2M,  payments  on  the  internet  of  things,  pay-per-use  payments,  or  trigger  solutions, 
paving the way for the integration of the settlement of smart contract-based transactions. 

Conditional payments can be developed relying on different approaches and technologies, so 
to achieve an innovation ecosystem in support of industry 4.0. Depending on the need, such 
approaches  can  consist  of  private  sector-led  solutions,  such  as  (i)  the  use  of  conventional 
payment  systems  in  combination  with  DLT/Smart  contracts  using  a  “trigger”;  or  (ii) 
stablecoins  issued  by  private  issuers;  (iii)  tokenised  commercial  bank  money.  Or, 
alternatively, the public sector can drive developments, in the case of (iv) central bank digital 
currencies, including the digital euro. Therefore, conditional payments can be achieved either 
by private or public solutions. 

288 Ibidem. 
289 E-krona report phase 2 (riksbank.se). 
290 E-krona report phase 2 (riksbank.se). 
291 See D. A. Disparte, “Privately issued digital currencies”, in Disintermediation economics: the impact of blockchain on markets and 
policies, Palgrave Macmillan, pp. 173-191. 

165 

 
 
                                                           
Conventional payment systems can be combined with DLT-based applications such as smart 
contracts,  by  means  of  a  “trigger”:  a  technological  bridge  that  acts  as  a  contract  execution 
system.  The  trigger  enables  the  DLT  application  to  initiate  a  payment  in  the  conventional 
payment  system  by  passing  on  the  required  information.  Conditional  payments  would  take 
place  outside  the  payment  infrastructure  but  rely  on  web-based  APIs,  which  in  turn  would 
trigger  a  payment  on  an  account-based  system.  Unlike  other  types  of  conditional  payment, 
the “trigger” solution does not require tokenised monetary units that can be used within the 
DLT environment. Depending on the use case, conventional payment systems in combination 
with DLT/smart contracts can be developed by the private sector, or by a close cooperation 
with the public sector. For example, in March 2021, Deutsche Börse, Deutsche Bundesbank 
and Germany’s Finance Agency developed and successfully tested a settlement interface for 
electronic securities292, in cooperation with a range of other market participants. Their proof 
of  concept  demonstrated  that  a  bridge  between  DLT  technology  and  conventional  payment 
systems  can  be  established,  so  to  settle  securities  in  central  bank  money  with  no  need  to 
create a central bank digital currency.293 The proof of concept for securities trading did not, 
however, involve a use case for retail payments. 

A  different  approach  to  achieve  programmability  consists  of  stabilised  cryptocurrencies  – 
known as stablecoins – not issued by a central bank but developed and distributed by private 
organisations and entities with substantial network effects. Stablecoins constitute blockchain-
native units  of account, and they are caught  the interest  of the market  as a tool for cheaper 
cross-border  payments  offering  instant  access  to  a  wide  array  of  financial  products  and 
instant  currency  conversion.  They  particularly  hold  potential  to  be  used  in  innovative 
payments (e.g. M2M payments). Aiming at enhancing liquidity across decentralised finance 
exchanges,  and  at  simplifying  settlements  in  the  crypto  ecosystem,  stablecoins  claim  to 
address the volatility of price typical of crypto-assets through a peg to an official currency, 
backed by liquid asset reserves. However, as shown in Annex 8 “The evolution of the internet 
and  payment  needs  of  industry  4.0”,  stablecoins  present  significant  concerns  for  financial 
stability. Due to the limited ability of private entities to issue stablecoins and ensure liquidity, 
in  comparison  to  central  banks’  capacity,  the  emergence  of  stablecoins  can  hardly  be 
compared to the potential stability gains that can be achieved with a public money alternative. 

Another  approach  for  programmability  is  offered  by  tokenised  commercial  bank  money. 
Commercial  banks  as  private  entities  can  issue  tokens  that  can  be  used  for  smart  contract 
transactions. Tokens are conditional digital right on either a physical or digital asset recorded 
on  a  decentralized  ledger  which  can  be  directly  possessed,  owned  and  transferred  without 
using an intermediary294. Tokenization can act as a game changer for the European economy 
by enabling the adaption of new technologies, digitization of business processes and creation 
of new business models. Commercial bank money solutions could contribute to the creation 
of an ecosystem with a high share of digital transactions based on tokens, or on several open 
transaction systems for the storage and transfer of tokens. The benefits for using commercial 
bank  tokens  include  access  to  and  alternative  solution  for  document-based  payments,  as 
commercial  bank  money  introduces  functionally  actionable  money  amounts  using  smart 
contracts. Furthermore, commercial bank money can reduce transaction costs and accelerated 
value date in cross-currency payment transactions. 

292 Securities settlement using DLT is performed with the aid of a “trigger” solution and a transaction coordinator in TARGET2, the 
Eurosystem’s large-value payment system. https://www.bundesbank.de/en/press/press-releases/dlt-based-securities-settlement-in-central-
bank-money-successfully-tested-861444. 
293 DLT-based securities settlement_Blockbaster IV (deutsche-finanzagentur.de). 
294 Roland Berger, Tokenize Europe 2025. 

166 

 
 
                                                           
Such  benefits  of  tokenised  commercial  bank  money  also  apply  to  CBDCs,  digital 
representations of fiat currency which offer a liability of the central bank in the same way as 
physical  currency.  Depending  on  its  technological  infrastructure  and  availability,  a  CBDC, 
and in particular the Digital euro, can accommodate for trends that will define the future of 
payments and finance. 

As opposed to central bank issued money, private solutions (i) will carry credit risk, (ii) are 
prone for concentration and less competition due to the existence of network effects, (iii) are 
thus more susceptible to large-scale operational failures and (iv) are not fully inclusive (i.e. 
no commercial interest for serving most vulnerable people). 

6 The role of stablecoins 

The  rising  role  of  non-cash  payments  and  the  quick  adoption  at  a  global  level  of  private 
solutions  for  crypto-assets  and  stablecoins  reveal  a  growing  demand  for  immediacy  and 
digitalisation. In the context of the digital euro, the question therefore arises, whether existing 
forms of public money in the form of banknotes and coins alone can satisfy that demand or 
whether it should be left to private forms of digital money to address it.  

The  Bank  for  International  Settlement  (BIS)  set  out  in  a  working  paper  of  2020295  that  so-
called  stablecoins  represent  an  opportunity  but  also  a  risk  to  monetary  policy.  On  the  one 
hand,  this  form  of  private  money  has  the  potential  to  grow  in  importance  almost  like 
traditional  fiat  currencies  and  become  a  regular  means  of  tender  in  commerce.  Issued  by 
private  parties,  the  number  of  stablecoins  in  circulation  is  not  under  direct  central  bank 
control.  On  the  other  hand,  contrary  to  fiat  money,  stablecoins  offer  opportunities  for 
regulatory  oversight,  too.  They  are  a  form  of  software,  which  is  conducive  to  “embedded 
regulation”296.  

A point of attention is that stablecoins with the most significant capitalisation are pegged to 
the  USD,  and  not  to  the  Euro.  These  stablecoins  represent  a  form  of  private  digital  money 
that  can  dollarise  e-commerce  outside  the  USA,  too.  USD  pegged  stablecoins  include,  for 
instance, USD Tether, USD Coin, Binance USD or DAI. Collectively they have achieved a 
global  market  capitalisation  (issuance  value)  exceeding  $175  billion,  and  a  global  monthly 
trading and transaction volume regularly approaching or even exceeding $ 500 billion. More 
recently,  thought,  US  company  circle  issued  a  stablecoin  called  the  Euro  Coin  or  Euro-C 
which is said to be redeemable 1:1 for Euros in bank accounts. 297  

Stablecoins  may pose  specific challenges to  financial stability  and monetary sovereignty298. 
As  stated  by  ECB’s  Executive  Board  Member  Fabio  Panetta:  “By  creating  further 
dependencies  on  non-European  providers,  it  could  increase  risks  to  Europe’s  strategic 
autonomy and threaten monetary sovereignty if central bank money is no longer at the heart 
of  the  payment  system.”299  This  consideration  is  among  those  which  the  European  Central 
Bank  highlights  in  the  context  of  a  digital  euro  project.  As  concluded  by  the  European 
Central  bank’s  Fabio  Panetta,  “If  the  “official  sector”  –  central  banks  and  supervised 
intermediaries  –  does  not  satisfy  this  demand,  others  will.300.”  A  Central  Bank  Digital 

295 https://www.bis.org/publ/work905.pdf.  
296 https://www.bis.org/publ/work905.pdf.  
297 https://www.circle.com/en/euro-coin. 
298 ECB Crypto-Assets Task Force (2020), “Stablecoins: Implications for monetary policy, financial stability, market infrastructure and 
payments, and banking supervision in the euro area”, Occasional Paper Series, No 247, ECB, September. 
299 Keynote speech by Fabio Panetta, Member of the Executive Board of the ECB, at the National College of Ireland, Dublin, 16 May 2022. 
https://www.ecb.europa.eu/press/key/date/2022/html/ecb.sp220516~454821f0e3.en.html. 
300 Keynote speech by Fabio Panetta, Member of the Executive Board of the ECB, at the National College of Ireland, Dublin, 16 May 2022. 

167 

 
 
                                                           
Currency  not  guaranteeing  a  support  to  innovative  applications  would  lead  a  gate  open  to 
private money solutions, particularly from third countries. Hence the importance of a digital 
euro for the competitiveness of the EU businesses and the safety of EU citizens. 

BOX: Concrete emerging use cases that could be supported by a digital euro 

Enabling M2M Payments: Machines with IoT sensors can be enabled through algorithms 
to  pay  for  products  or  services  (e.g.:  predictive  machine  maintenance,  cooperative 
decentralized forms of manufacturing, etc.).  
Delivery  Based  Payment  Automation:  Programmability  of  payments  with  smart 
contracts and non-fungible tokens can create new opportunities for the commercialization 
of intellectual property rights. The resale of digital works of art can trigger payments to the 
artist long time after the artist has sold the work of art to the first buyer. In trade finance, 
the delivery of a digital letter of credit could trigger automatically the payment for goods 
with digital money301 in an escrow account.  
Atomic Swaps: Tokenised securities, utilities, certificates and currencies can be exchanged 
“atomically”, which means that each of the steps of the transaction (however complex) is 
executed simultaneously and indissolubly. When one leg of a transaction is settled on DLT, 
a  cash  leg  should  be  executed  also  on  DLT.  In  general,  a  digital  euro  would  ease  such 
solutions;  in  particular,  IOSCO  principles302  require  that  security  settlements  occur  in 
central  bank  money.  A  cash  leg  of  a  security  transaction  on  DLT  would  thus  require  a 
DLT-compatible  digital  euro.  Tests  are  being  piloted  with  success  in  several  large 
jurisdictions already (e.g. Project Jura), involving non-euro denominated central banks and 
banks.303 
Data Pooling: Programmability of a digital euro could support the European Union’s Data 
Strategy  as  a  tool  to  remunerate  data  and  underpin  data  transfers  on  smart  contracts.  By 
combining  in  one  go  data  transfers  and  software  accompanying  data  with  a  digital  euro, 
novel use cases for federated machine learning could be enabled and funded.  
Combining  Payments  with  Tax  Reporting:  Programmability  of  a  digital  euro  could 
innovate VAT payments and combine it with reporting. A merchant could agree to opt-in 
to  an  automated  VAT  settlement  system.  The  system  could  be  implemented  in  various 
ways.  Merchants  could  automate  their  VAT  payments  and  governments  could  automate 
refunds. 

301 Digital money refers to any means of payment that exists in a purely electronic form including but not limited to bank deposits, CBDCs, 
e-Money, tokenized assets and crypto-assets. 
302 Item 10 of CPSS-IOSCO Task Force Recommendations for Securities Settlement Systems (2001).  
303 Although this example is relevant for so called “wholesale” which is outside the scope of the D€, similar techniques could be used for 
less valuable items.  

168 

 
 
 
 
 
 
 
 
 
 
                                                           
Annex 9 - International use of a digital euro 

1.  Description of policy options 

Option  4a:  Digital  euro  is  available  for  all  EU  residents/businesses  and  third  countries’ 
residents/businesses 

Under this option, all EU residents,  wherever located  (in the euro area or in  other Member 
States) and residents in third countries would in principle have access to the digital euro and 
make payments in digital euro.  

For non-euro area EU Member States, the digital euro would be distributed in the context of 
arrangements  between  the  ECB  and  the  respective  central  banks.  For  third  countries,  the 
international  use  of  the  digital  euro  might  take  place  in  the  context  of  bilateral  agreements 
between  the  Union  and  third  countries.  The  distribution  of  digital  euro  by  intermediaries 
would take place on a voluntary basis (as there is no legal tender outside the euro area except 
in the case of SSCs304, which use the euro).  

Option 4b: Digital euro is available for visitors to the euro-area and under conditions for non-
euro area Member State residents/businesses and third countries residents/businesses  

Under this option, any resident/business from non-euro area jurisdictions would have access 
to the digital euro under specific conditions aiming at safeguarding the monetary sovereignty 
of non-euro-area countries and mitigating financial stability risks.  

For non-euro area EU Member States, the digital euro would be distributed in the context of 
arrangements between the ECB and the respective central banks as well. This would include 
tools  to  prevent  an  excessive  use  of  digital  euros  on  financial  stability  and  monetary 
sovereignty  grounds.  Non-euro  area  central  banks  may  for  instance  further  restrict  any 
holding limits that the Eurosystem may apply. Tools should be in place to monitor usage in 
non-euro  area  Member  States  in  order  to  avoid  that  the  digital  euro  becomes,  de  facto,  the 
predominant  currency  in  a  non-euro  area  Member  State,  practically  replacing  the  national 
currency, as this could have a negative impact on the incentives of those Member States to 
follow the adoption procedure enshrined in Article 140 TFEU.  

For third countries, the international use of the digital euro would might take place as well in 
the context of bilateral agreements between the Union and third countries that would govern 
the distribution of the digital euro (i.e. supervised entities) and the conditions of their use (i.e. 
potential holding limits). .  

304 Small Sized Countries (San Marino, Monaco, The Vatican and Andorra) are subject to monetary agreement and use the Euro as legal 
tender. 

169 

 
 
 
 
                                                           
Option 4c: Digital euro is available only for visitors to the euro-area 

Under  this  option,  the  digital  euro  would  only  be  made  available  to  EU  and  third-country 
residents/businesses  (e.g.  tourists)  visiting  the  euro  area.  The  digital  euro  would  not  be 
available for e.g. trade outside the euro area.  

2.  Analysis of policy options 

Option  4a:  Digital  euro  is  available  for  all  EU  residents/businesses  and  third  countries’ 
residents/businesses 

Option 4a would benefit non-EA residents/businesses and support the euro area economy as a 
whole by facilitating cross-border payment transactions with non-euro area countries, and as 
such  would  mirror  the  existing  use  of  commercial  bank  money  in  euro  by  non-euro  area 
residents/businesses who may open a bank account in euro in non-euro area Member States 
or in third countries. Bank deposits and loans in euro already feature predominately in some 
countries, as illustrated below.    

Euroisation of bank deposit and loans 

Source: ECB International Role of the Euro report, Statistical Annex 

170 

 
 
 
 
 
In  addition,  a  broad  international  use  of  the  digital  euro  would  be  commensurate  with  the 
existing  use  of  euro  cash  outside  the  euro-area.  Euro  banknote  circulation  is  growing 
continuously,  even  though  cash  usage  is  declining.305.  The  significant  demand  from  these 
regions  stems  from  cross-border  transactions,  tourism  and  the  search  for  safe  haven  assets 
during periods of economic or political stress. 

Benefits include: 

  Support  of  trade.  The  December  2018  Commission  communication  “Towards  a 
stronger international role of the euro” identified a number of benefits of an increased 
international  use  of  the  euro.  While  that  communication  predated  the  digital  euro 
project,  benefits  identified  in  the  Commission  communication  could  be  of  similar 
relevance  if  the  digital  euro  was  used  internationally306.  An  unconstrained  access  to 
digital  euro  for  non-euro  area  residents  could  support  trade,  provided  that  payment 
transactions  are  facilitated  notwithstanding  the  existence  of  holding  limits  are 
fulfilled: by enhancing the euro’s role as a reserve currency, which may benefit euro 
invoicing, by lowering the transaction cost and risks for trade with euro area entities 
as well as  by enabling  more efficient  and faster cross-border payments  compared to 
the  currently  dominant  correspondent  banking-based  cross-border  transactions. 
Importantly, an international use of the digital euro would allow EA intermediaries to 
offer  innovative  payment  services  attractive  for  global  players.  This  may  prove 
particularly important in the context of industry 4.0. 
International use of the digital euro. In many non-euro area countries and especially in 
the  absence  of  domestic  digital  currencies,  the  use  of  a  digital  euro  could  have  a 

 

305 This phenomenon has been referred to as the “paradox of banknotes” (Bailey, 2009) or the “cash paradox” (Williams, 2012; Jiang and 
Shao, 2020), see Foreign demand for euro banknotes Occasional Paper (ECB, January 2021) for more details. Other European currencies, 
such as the Swedish krona or the Danish krone, do not show the same pattern. 
306 Lower cost and lower risk of trading internationally for European businesses. This would happen for a decrease in currency conversion 
costs, assuming that an increased use of euro in trade invoicing will remove the exchange risk and other related costs, especially for small 
and  medium-sized  European  businesses;  stronger  autonomy  of  European  consumers  and  businesses,  allowing  them  to  pay  or  receive 
payments  for  their  international  trade,  and  finance  themselves  with  reduced  exposure  to  geopolitical  risks;  Improved  resilience  of  the 
international financial system and economy, making them less vulnerable to exchange rate shocks. 

171 

 
 
 
 
                                                           
strong appeal to potential users. This could altogether create a positive feedback loop 
supporting the digital euro’s international use and strengthening its visibility.307 

  Competitiveness  of  the  digital  euro.  As  emphasized  by  ECB,  in  a  scenario  where 
China allowed for  a  general  international  use of  the e-yuan, or if the US decided to 
launch  a  CBDC  to  promote  the  use  of  the  dollar  at  the  expense  of  the  euro,  the 
issuance of a digital euro outside the euro area could be motivated in part by the need 
to support the international role of the euro.308 It is nevertheless too early to assess the 
need to issue a digital euro on competitiveness ground. Third countries have refrained 
from promoting a wide use of CBDC309 outside their own jurisdiction. 

  Efficiency  of  cross-border  payments.  Benefits  may  include  efficient  and  cheaper 
cross-border  payments310,  particularly  important  for  countries  with  a  high  share  of 
trade with the euro area.  

Option 4a would be effective in bringing about a state-of-the-art, efficient payment means for 
the EU’s digitalizing economy (specific objective 1). More generally, people and businesses 
would  be  in  a  position  to  use  it  outside  the  euro-area  to  support  trade.  Whether  option  4a 
would make the euro more competitive and support specific objective 2 mainly depends on 
potential future developments taken by major jurisdictions that have taken so far a cautious 
approach.  

Option  4a carries  financial stability, macro-economic and political  risks that would  make it 
inefficient in view of the costs that option would entail.  They include: 

  Financial  stability.  Option  4a  may  negatively  impact  non-EA  countries  in  terms  of 
monetary autonomy and financial stability (“spill-over effects”). As pointed out by the 
G7 principles for retail CBDC, significant use or holdings of any particular CBDC by 
residents/businesses of a foreign country could lead to currency substitution and loss 
of  monetary  sovereignty  in  that  foreign  country.  An  international  use  of  the  digital 
euro  may  also  bring  about  bank  disintermediation  in  banks  outside  the  Euro  area. 
According to an IMF working paper311 the presence of a foreign CBDC which acts as 
an international safe asset may increase the risk of financial disintermediation in the 
domestic  banking  sector,  which  can  be  accompanied  by  higher  and  more  volatile 
capital flows. 

  Risks  to  the  Eurosystem.  Digital  euroisation  could  eventually  increase  demand  for 
euro liquidity lines312 and increase the likelihood of calls for ECB interventions. 
  Negative macro-economic impact of an international use. There are also costs from an 
increased  use  of  the  euro  internationally  (“exorbitant  duty”),  meaning  that  the  euro 

307 European Central Bank (2021), The international role of the euro. 
308  Report  on  a  digital  euro,  ECB,  October  2020,  scenario 6:  “the  issuance  of  CBDCs  by  major  foreign  central  banks could  enhance  the 
status of other international currencies at the expense of the euro. In such a situation, the Eurosystem might consider issuing a digital euro in 
part to support the international role of the euro, stimulating demand for the euro among foreign investors”. In its public consultation on a 
digital  dollar  of  20  January  2022,  the  US  Fed  clearly  outlined  the  need  to  preserve  the  dominant  international  role  of  the  U.S.  dollar  in 
support of a US-issued CBDC.  
309 See PBoC, White Paper Progress of Research & Development of E-CNY in China, July 2021 which noted that “Through technically 
ready for cross-border use, e-CNY is still designed mainly for domestic retail payments at present”, given financial stability and monetary 
sovereignty issues and ongoing international work on these issues. 
310 Costs of cross-border payments have increased recently due to the retreat of the US-centred correspondence banking system. Though the 
US dollar is the globally dominant currency in trade invoicing, the euro may be regarded as a regionally dominant currency in Europe and 
some parts of Africa (See Boz et al. “Patterns in Invoicing Currency in Global Trade”, IMF Working Paper 20/126).  
311https://www.imf.org/en/Publications/WP/Issues/2022/05/06/Cross-Border-Central-Bank-Digital-Currencies-Bank-Runs-and-Capital-
Flows-Volatility-517625 
312 See the Special Feature on “The benefits and costs of the international role of the euro at 20” In IRE (2019). 

172 

 
 
                                                           
would  be  subject  to  appreciation  in  global  stress  episodes,  with  negative  impact  on 
trade.313 

to 

the  digital  euro  settlement 

  Technical  challenges  posed 

infrastructures. 
Intermediaries distributing the digital euro outside the Euro-area would have to adapt 
their systems and infrastructures in order to acquire digital euro payment instruments; 
  Supervisory  challenges.  Intermediaries  distributing  the  digital  euro  would  be 
supervised  intermediaries,  which  may  call  for  supervisory  arrangements  with  third 
countries. 

More fundamentally, this option has far-reaching implications as this would imply opening a 
digital  euro  account/wallet  to  any  non-EU  residents/businesses  that  wants  to  be  part  of  a 
digital euro transaction (as payer or payee). It would have direct consequences on the conduct 
of  the  monetary  policy  by  the  ECB.  Preliminary  analyses  by  the  ECB  indicate  that  total 
digital euro holdings between one trillion and one and a half trillion euro (18% of the ECB 
balance sheet) would avoid negative effects for the financial system and monetary policy314. 
Assuming that euro-denominated bank deposits were converted into digital euro315, they will 
represent 3% of the ECB balance sheet. Where demand for digital euro is similar to demand 
for euro cash abroad, they could amount to 6% of ECB balance sheet316. This option would 
therefore result in significantly lower holding for euro-area residents as the same amount of 
digital euros provided by the Eurosystem would need to be divided between users from both 
within and outside the euro area. 

The embedding of features into the digital euro wallet to cater for non-euro area users is 
expected to imply only marginal implementation costs (e.g. for including those features when 
developing a mobile app). Maintaining those features, and enforcing for instance a specific 
cap on holdings, is not expected to have any significant impact on running costs. Most of the 
additional effort will be geared towards setting up the necessary agreements with institutions 
and intermediaries from non euro area Member States and third countries. 

The  risks  outlined  above  are  commonly  identified  as  spillovers  that  central  banks  want  to 
minimise. A wide international use of the digital euro would come up against principle 7 of 
the G7 Public Policy Principles for retail CBDC317. International work is ongoing to further 
study these effects in the context of the Financial Stability Board318. In addition, a wide use of 
the digital euro in non-euro area Member States potentially raises legal issues if it results in a 
unilateral “euroisation” that may be deemed incompatible with the Treaty319. 

Moreover, in certain scenarios, respect for data protection includes strict compliance with the 
rules  on  international  transfers  of  personal  data  as  set  out  in  the  EU  data  protection 
framework.  In  particular,  when  transferring  personal  data  outside  the  EU,  supervised 
intermediaries shall comply with the rules on international data transfers set out in Chapter V 

313 See the Special Feature on “The benefits and costs of the international role of the euro at 20” In IRE (2019). 
314 “The digital euro and the evolution of the financial system” Introductory statement by Fabio Panetta, ECON Committee, 15 June 2022 
315 Data of the International Role of the Euro 2022 report on EU neighbouring countries 
316 Data of the ECB occasional paper “Foreign demand for euro banknotes”, January 2021. Estimates of foreign demand or euro cash is 30-
50% of total euro cash.  
317  “CBDCs  should  be  designed  to  avoid  risks  of  harm  to  the  international  monetary  and  financial  system,  including  the  monetary 
sovereignty and financial stability of other countries” 
318 Building Block 19 of the G20’s roadmap for enhancing cross-border payments, October 2021. As a next step, the CPMI in collaboration 
with  BIS  Innovation  Hub  IMF  and  World  Bank  will  identify  and  analyse  options  for  access  to  and  interlinking  of  CBDCs  that  could 
improve cross-border payments 
319  Report by  the ECOFIN  Council  to  the  European Council  in  Nice  on the exchange  rate  aspects  of  enlargement, 8  November  2000:  “it 
should  be  made  clear  that  any  unilateral  adoption  of  the  single  currency  by  means  of  "euroisation"  would  run  counter  to  the  underlying 
economic reasoning of EMU in the Treaty,  which foresees the eventual adoption of the euro as the endpoint of a structured convergence 
process within a multilateral framework”. 

173 

 
 
                                                           
GDPR. To the extent Union institutions and bodies are involved in a transfer of personal data 
to a third country, Chapter V EUDPR shall apply. 

Option 4b: Digital euro is available for visitors to the euro-area and under conditions for non-
euro area Member State residents/businesses and third countries residents/businesses  

Option 4b frames option 4a to mitigate financial stability risks that an exorbitant use of the 
digital  euro may pose in non-euro area Member  States  or in  third countries and to  mitigate 
any  adverse  effects  on  the  Eurosystem.  At  the  same  time  it  would  still  allow  for  some 
positive effects on trade and cross-border payments, e.g. by lowering the transaction cost and 
risks of cross-border payments and increasing their speed and efficiency.  

The  effectiveness  of  Option  4b  in  facilitating  international  trade  and  in  terms  of  providing 
state-of-the-art  payment  will  depend  on  agreements  with  third  countries.  This  makes  the 
effectiveness of this option more uncertain than option 4a. We can expect that the staggered 
approach would lead to a staggered impact. Various countries (either Member States or third 
countries) may conclude an agreement with the ECB at various times and thus the impacts –
both benefits and risks – would materialise over different timelines. This option would entail 
costs (negotiation and implementation of agreement) and has implications in terms of design. 
Digital  euro  distribution  models  would  need  to  embed  features  that  would  allow  various 
limits  (e.g.  cap  on  holdings)  requested  by  non-euro  area  countries  to  cater  for  financial 
stability  risk  and  bank  disintermediation  locally.  Similar  to  option  4a,  the  embedding  of 
features into the digital euro distribution model to cater for non-euro area users is expected to 
imply only marginal implementation costs (e.g. for including those features when developing 
a  mobile  app).  Maintaining  those  features,  and  enforcing  for  instance  a  specific  cap  on 
holdings,  is  not  expected  to  have  any  significant  impact  on  running  costs.  Most  of  the 
additional effort will be geared towards setting up the necessary agreements with institutions 
and intermediaries from third countries. 

Option  4b  is  consistent  with  the  G7  principles  that  asked  for  both  benefits  and  risks  of  an 
international use of CBDC to be adequately balanced. In that respect, the G7 recommended a 
cautious approach and further work given the potential implications of an international use, in 
particular  in  terms  of  higher  capital  flow  volatility  that  may  amplify  spillovers  and  cause 
spillbacks,  and  in  terms  of  the  supply  and  demand  of  global  reserve  assets  and  the 
composition of international reserve currencies. By making the international use of the digital 
euro  subject  to  agreement  with  third  countries,  that  option  will  fit  in  with  the  ongoing 
international work at FSB level.  

Option 4c: Digital euro is available only for visitors to the euro-area 

Under option 4c, international use of a digital euro would not be achieved by allowing access 
to  digital  euro to  non-euro area residents/businesses.  It  would nevertheless support inbound 
tourism in the euro area. Tourists tend to use more cash than residents mostly to reduce their 
exchange rate fees. They could be therefore more affected i.e. face higher transactions costs 
when paying abroad than euro area residents by a de facto decline of the availability of cash. 
Using  the  digital  euro  may  save  them  from  having  to  store  a  large  amount  of  cash.  This 
international  use  has  been  supported  in  other  jurisdictions  implementing  or  piloting  CBDC 
320. 

320 The Sand Dollar issued in Bahamas was officially launched in October 2020 and the authorities grant access only to foreign visitors 
(tourists) with limitations. A large pilot of the e-yuan was launched during the Winter Olympics in China in February 2022, when foreigners 
were also allowed to access it. However, the take up by foreigners at that time was small.   

174 

 
 
                                                           
 
Under this option, the digital euro would not be able to facilitate international trade via cross-
border  digital  euro  payments.  In  an  extreme  adverse  scenario,  where  other  foreign-
denominated means of payment  are instead increasingly used  for trade purposes, this  could 
come  at  the  disadvantage  of  euro  area  firms  engaged  in  international  trade.  However,  it 
should be noted that a digital euro that does not allow for international use besides inbound 
tourism purposes can still facilitate cross-currency payments if it is interoperable with other 
jurisdictions’ CBDCs.  However, interoperability  cannot  be treated as  a policy option in  the 
context  of this  Impact  Assessment, also  given that this would depend on decisions of other 
jurisdictions outside of the euro area.  

Option  4c  will  be  less  effective  in  promoting  a  wide  usage  of  digital  euro  for  transactions 
between  euro  area  residents/businesses  and  residents  and  businesses  outside  the  euro-area. 
This  option  would  not  bring  about  a  state-of-the-art,  efficient  payment  means  for  the  EU’s 
digitalizing economy (specific objective 1) as e.g. supply chains outside the euro-area would 
not be integrated in conditional payments, and more generally people and businesses would 
not be in a position to use it outside the euro-area to support trade.  

In terms of meeting specific objective 2, a limited geographical use of the digital euro under 
Option  4c  would  not  increase  the  euro’s  competitiveness  vis-à-vis  other  currencies,  third 
countries-issued  CBDCs  and  stablecoins  that  may  be  used  for  payments  outside  the  euro-
area.  

Under this option the Eurosystem would bear the least cost compared to other options in this 
section.  Overall,  conditions  for  providing  the  digital  euro  would  be  the  same  than  for  euro 
area  residents,  except  for  some  specificities  in  onboarding  conditions  and  design  features 
such  as  the  expiration  date  of  accounts/wallets  opened  to  visitors  to  the  euro  area  –  which 
may  even  be  provided  without  need  for  prior  agreement  with  third-country  institutions  and 
intermediaries.  

This  option  is  consistent  with  the  territorial  scope  of  the  euro  cash,  which  has  legal  tender 
only in the euro-area, but is not consistent with the existing use of bank accounts in euro or 
with  the  holding  of  euro  cash  outside  the  euro-area.  This  option  is  not  consistent  with  the 
Commission policy objective of supporting an international role of the euro.  

Stakeholders’ views on all options 

Both citizens (54 out of 188, 28%) and professional respondents (94 out of 124 found, 76%) 
were  mostly  supportive  of  a  digital  euro  available  only  for  euro  area  citizens  and  for  intra 
euro  area  transactions.  47  citizens  (25%)  and  only  1  professional  were  against.  85  citizens 
(45%) and 26 professional (21%) did not reply. 49 out of 188 EU citizens (26%) supported 
that tourist visiting the euro area should also be able to pay with a digital euro (26%) and 28 
(14%)  were  against  (86  (45%)  did  not  reply.  The  same  question  received  support  from  75 
professionals  (60%)  and  31  (25%)  did  not  reply.  Other  use  cases  received  less  but  still 
significant  support  from  professional  (see  Annex  2).  Professional  respondents  warned  that 
the  use  beyond  the  euro  area  may  come  with  a  series  of  significant  operational  issues:  e.g. 
onboarding of non-residents, how to perform KYC functions, fraud and AML, servicing and 
closing of the wallet. For trade purposes, professional respondents believed that a wholesale-
oriented  digital  currency  suited  for  large  value  cross-currency  and  innovative  payments 

175 

 
 
                                                                                                                                                                                     
 
(smart contracts321, conditional payments) would be better suited than a retail focused digital 
euro.  

Professional  respondents  agreed  that  the  use  of  a  digital  euro  outside  of  the  euro  area  may 
bring  risks  for  non-euro  area  countries  (e.g.  unwanted  capital  flows)  especially  if  their 
currency  is  less  competitive  than  the  euro  although  they  showed  moderate  concerns  about 
them.  In  non-euro  area  Member  states,  a  widespread  use  of  the  digital  euro  could  be 
detrimental for the local financial system and the conduct of the sovereign monetary policy, 
especially  in  crises.  Therefore  it  was  suggested  to  limit  the  use  of  the  digital  euro 
internationally and potentially open this possibility only for transactions related to visitors. 

Conclusion 

While  option  4a  is  more  effective  than  option  4b  and  4c  in  meeting  specific  objective  1, 
option 4b is more efficient to address macro-economic, financial stability and political risks 
that option 4a would entail.  

In  terms  of  meeting  specific  objective  2,  while  a  competitive  advantage  of  the  euro  would 
mainly depend on whether other jurisdictions promote an international use, option 4a would 
not necessarily be more effective than option 4b as an unfettered international use may lead 
to political tensions.  

As regards the coherence of the above options with  other policies of the EU and G7, while 
option  4a  would  be  coherent  with  the  Commission’s  agenda  of  promoting  the  international 
use of the euro, that option is deemed not fully compatible with international standards that 
aim at limiting spill-over effects from CBDCs and, therefore, in that respect, is less coherent 
than  option  4b.  Option  4c  is  not  coherent  with  Commission  policy  promoting  the 
international role of the Euro. 

On  the  basis  of  this  analysis,  options  4b  and  4c  are  selected  as  preferred  policy  options  in 
terms of achieving the specific objectives 1 and 2 in a consistent way with other policies of 
the EU and G7. An international use would be achieved in a gradual way, starting with option 
4c (access to visitors to the euro area) as suggested in the public consultation, and extended, 
subject  to  agreements  with  non-euro  area  Member  States  and  third  countries  to  mitigate 
financial stability risks (option 4b).   

Table - Comparison of options aimed to ensure that the central bank issued money, the 
euro can meet the payment needs in the digital age 

Option 

Effectiveness 

Do nothing – no digital euro 
International use 
Option 4a - Digital euro available for 
all EU residents/businesses and third 
countries residents/businesses 
Option 4b - Digital euro available for 
visitors to the euro-area and under 
conditions for non-euro area 
residents/businesses and third 

0 

++ 

+ 

Efficiency 
(cost-
effectiveness) 
0 

– – 

+ 

Coherence  Overall score 

0 

– 

+ + 

0 

– 

+  

321 See Annex 8 on the evolution of the internet and payment needs of industry 4.0. 

176 

 
 
 
                                                           
countries residents/businesses 
Option 4c - Digital euro available 
only for euro-area 
residents/businesses and visitors to 
the euro-area 
Magnitude of impact as compared with the baseline scenario (the baseline is indicated as 0): 
++ strongly positive; + positive; – – strongly negative; – negative; ≈ marginal / neutral;  

++ 

+ 

+ 

+ 

177 

 
 
 
 
 
 
 
Annex 10 - Third countries and non-Euro area CBDCs 

Around the world, 87 countries representing over 90 percent of global GDP are speeding up 
efforts  in  exploring  CBDCs  according  to  the  Atlantic  Council.322  In  addition,  international 
institutions  and  inter-governmental  political  authorities  are  contributing  to  the  area  through 
policy principles,  applied technology  research, proofs of concepts  and prototypes mostly in 
close  coordination  with  central  banks  and/or  the  private  sector.  While  both  advanced  and 
emerging economies are engaging in CBDC projects, their respective stage of engagement – 
research,  development,  pilot,  or  launch  –  depends  greatly  on  the  country.  Currently,  9 
countries  have  fully  launched  a  digital  currency  which  include  the  Bahamas,  seven  Eastern 
Caribbean  countries  and  Nigeria  as  Africa’s  first  CBDC.  In  terms  of  pilots,  over  a  dozen 
countries  are  potentially  preparing  for  a  launch  including  China  and  Sweden  among  others 
and  the  rest  are  either  in  development  or  in  research.  Although  motivations,  purposes,  and 
policy goals for issuing a CBDC vary significantly across advanced and emerging countries, 
most  central  banks  are  exploring  a  retail  CBDC,  followed  by  a  wholesale  CBDC  and  a 
number  of  central  banks  are  exploring  both.323  In  addition,  the  Bank  of  International 
Settlements  is  actively  engaging  in,  and  coordinating  multiple  CBDCs  (mCBDCs)  linking 
developments  and  pilots  from  several  central  banks  into  projects  such  as  project  Jura, 
Helvetia and Dunbar among others. 324 

In  March  2022,  the  US  Administration  placed  ‘the  highest  urgency’  on  research  and 
development efforts surrounding a US CBDC following the issuance of the Executive Order. 
The Administration expects regulators to submit a joint research assessment on a US CBDC 
implication by September 2022.325 Alongside this Executive Order, the Federal Reserve Bank 
of  Boston  is  collaborating  with  the  Massachusetts  Institute  of  Technology  to  develop  a 
multiyear  research  project  exploring  the  technical  challenges  and  opportunities  of  a  US 
CBDC  entitled  project  Hamilton.  While  the  Federal  Reserve  has  made  no  decisions  on 
whether to pursue or implement a US CBDC, it has been exploring its potential benefits and 
risks  from  a  variety  of  angles  with  a  key  focus  lying  on  whether,  and  how  a  CBDC  could 
improve on an already safe and efficient  U.S. domestic payments system. For that purpose, 
the Fed issued a discussion paper in January 2022 in an effort to understand whether and how 
a US CBDC would improve its domestic payments system.  

In the United Kingdom,  HM Treasury and the Bank of England published a consultation in 
2022 setting out their assessment of the case for a UK CBDC, including the merits of further 
work to develop an operational and technology model.326 On 07 February 2023, the Treasury 
and the Bank of England announced a consultation327 on a potential digital pound, or central 
bank digital currency (CBDC). A digital pound would be issued by the Bank of England and 
could  be  used  by  households  and  businesses  for  everyday  payments  in-store  and  online.  If 
introduced  a  digital  pound  would  be  interchangeable  with  cash  and  bank  deposits, 
complementing  cash.  A  digital  pound is  likely  to  be  needed  in  the  future  according  to  a 
consultation paper published today by HM Treasury and the Bank of England. Nevertheless, 
no  decision  has  been  taken  at  this  stage  to  introduce  one.  The  Bank  of  England  will  take 

322 Central Bank Digital Currency Tracker - Atlantic Council 
323 Ready, steady, go? - Results of the third BIS survey on central bank digital currency 
324 BIS Innovation Hub work on central bank digital currency (CBDC)  
325 Executive Order on Ensuring Responsible Development of Digital Assets | The White House 
326 UK central bank digital currency | Bank of England 
327 https://www.bankofengland.co.uk/news/2023/february/hm-treasury-and-boe-consider-plans-for-a-digital-pound 

178 

 
 
                                                           
forward further research and development work. The public were invited to give their views 
on  the  scheme  to  be  taken  forward.  The  consultation  is  being  launched  because  both  HM 
Treasury and the Bank want to ensure the public have access to safe money that is convenient 
to use as our everyday lives become more digital, while supporting private sector innovation, 
choice and efficiency in digital payments. 

In Sweden, the case for a CBDC is stronger provided that the use, and role of cash is rapidly 
declining and is the lowest in Europe. As such, the Riksbank started their research on the e-
krona project in 2017 and the central bank entered the pilot phase in 2020. Currently in Phase 
3,  the  e-krona  project  aims  to  construct  a  possible  technical  platform  for  the  e-krona,  in 
collaboration with the private sector, with the objective to learn more about how a technical 
solution  could  work.  More  specifically,  the  Phase  1  focused  on  a  token-  and  blockchain-
based technical solution within a distributed network. During Phase 2, the technical tests have 
included  investigating  whether  and  how  an  e-krona  could  function  offline,  whether  the 
performance  of  the  tested  solution  is  adequate  and  how  banks  and  other  PSPs  could  be 
integrated within the e-krona network. At last, Phase 3 will continue to test specific parts of 
the  technical  solution,  with  a  focus  on  preparing  for  an  issuable  e-krona,  although  the 
political decision is an inquiry in progress.  

In  China,  research  surrounding  CBDC  started  in  2014  and  the  People’s  Bank  of  China 
(PBoC)  started  to  pilot  it  in  2020.  The  PBoC  is  currently  partnering  with  state-owned 
commercial  banks,  online  banks,  telecom  operators  and  internet  service  providers  with  the 
aim of improving convenience, efficiency and resilience of its current retail payment system. 
During the 2022 Winter Olympics, China’s Digital Currency Electronic Payment was made 
available to visitors from third countries on a trial basis and in March 2022, various selected 
pilots  were  running  in  major  cities  including  Beijing  and  Shanghai,  with  plans  to  expand 
gradually in several other cities. It has been estimated in January 2022 that over 260 million 
users have already access to China’s official digital yuan app, the e-CNY.  

Beyond  individual  countries,  the  G7  finance  officials  endorsed  public  policy  principles  for 
retail  CBDC  in  2021  stating  that  a  "strong  international  coordination  and  cooperation  on 
these  issues  helps  to  ensure  that  public  and  private  sector  innovation  will  deliver  domestic 
and cross-border benefits while being safe for users and the wider financial system."328  

The  Bank  of  International  Settlements  is  at  the  forefront  of  research  and  development  of 
mCBDCs and is currently involved with a number of central banks around the world. Project 
Helvetia is a multi-phase investigation on the settlement of tokenized assets in central bank 
money329, Project Dunbar developed two prototypes for a shared platform that could enable 
international  settlements  using  digital  currencies  issued  by  multiple  central  banks330,  and 
Project  Jura  explores  cross-border  settlement  using  a  wholesale  CBDC.331  In  addition,  the 
BIS has studied throughout Project Aurum the benefits and challenges of tiered architectures 
for the distribution of retail CBDC through commercial banks and PSPs332 and the Inthanon-
LionRock Project aims at buildings a multi-CBDC platform for international settlements.333  

328 G7 Public Policy Principles for Retail Central Bank Digital Currencies - G7 UK Presidency 2021 
329 Project Helvetia: A multi-phase investigation on the settlement of tokenised assets in central bank money  
330 Project Dunbar: international settlements using multi-CBDCs  
331 Project Jura: cross-border settlement using wholesale CBDC  
332 Project Jura: cross-border settlement using wholesale CBDC 
333 Multiple CBDC (mCBDC) Bridge  

179 

 
 
 
                                                           
Top 10 retail CBDC projects 

Top 10 wholesale CBDC projects 

Source: PwC Global CBDC Index and Stablecoin Overview 2022 

180 

 
 
 
 
 
Annex 11 - Financial stability and macroeconomic impact 

1.  Overview:  How  an  unconstrained  digital  euro  can  impact  financial  stability  and 
credit provisioning to the real economy 

A digital euro could erode banks’ deposit base. The digital euro increases choice of users 
and has the potential to take some market share from existing means of payments, including 
from  cash  and  commercial  bank  deposits.  The  extent  to  which  households  and  firms  may 
prefer using and holding digital  euros instead of  commercial bank deposits  will depend  the 
features  of  digital  euro.  These  are  both  of  financial  (i.e.  credit  risk,  interest  rates  and 
transaction  fees)  and  non-financial  nature  (e.g.  availability,  acceptance,  safety  and 
convenience). Especially the zero credit risk nature of a digital euro can motivate depositors 
(especially  with  holdings  above  the  EUR  100.00  not  covered  by  the  deposit  guarantee 
scheme) to shift deposits in large amounts from commercial banks to the ECB. 

In certain circumstances, a digital euro may arguably also increase the likelihood, scale 
and speed of bank runs, although the extent of this is unclear due to lack of precedents. 
Compared  to  a  cash  bank  run,  a  digital  bank  run  looks  more  likely  and  may  happen  more 
rapidly  because  of  lower  transaction  costs  for  converting  deposits  (from  a  website  or  an 
application) and because digital  euros would  likely  imply lower holding  costs, in  particular 
storage costs, and risks than banknotes, given the relative facility of keeping large amounts of 
digital  euros  compared  to  banknotes.  At  the  same  time,  depositors  already  have  the 
possibility  to  transfer  their  deposits  to  another  bank  quickly  and  easily  if  they  are  in 
possession  of  multiple  accounts.  Hence,  the  potential  heightened  probability  of  bank  runs 
should mainly apply to the case of systemic banking crises, in which an electronic transfer to 
another  bank  account  does  not  eliminate  a  depositor’s  risk.  Indeed,  Rainone  (2021)  shows 
that in idiosyncratic bank stress episodes deposits are mainly shifted to large domestic banks 
generating  a  size  premium  and  that  under  a  fixed-rate,  full  allotment  regime,  the  liquidity 
drain  is  mostly  offset  through  open  market  operations334.  In  the  euro  area,  such  systemic 
withdrawals of bank deposits have only been observed in case of perceived redenomination 
risks connected to concerns over an exit from the common currency area. It should be noted 
that some arguments have also been brought forward that suggest that CBDC could actually 
stabilise the financial system335: first, by providing supervisory authorities with a new source 
of  real-time  information  that  could  enable  timely  intervention  adding  to  tools  that the  ECB 
has to  monitor instant payments  and second, by  lowering banks’ maturity  mismatch, which 
would reduce their exposure to depositor runs.  

Deposits  play  an  important  role  in  euro  area  bank  funding,  both  in  quantitative  and 
qualitative terms. As a relatively stable and cheap source of funding (taking collateral costs 
into  account),  deposits  enjoy  preferential  regulatory  treatment  (see  below).  Currently,  they 
account for roughly 40% of banks’ total liabilities on aggregate, with 32% from households 
and non-financial corporations. However, this aggregate figure masks heterogeneity both on a 
country  level  and  also  in  relation  to  banks’  business  models.  Among  the  euro  area’s  four 
largest  countries,  deposits  represent  more  than  50%  of  banks’  liabilities  in  Spain  and  Italy, 
44% in Germany but only 28% in France. At the same time, bank-level data also illustrates 
how  diverse  bank  funding  models  can  be:  at  the  euro  area  level,  deposits  play  a 

Rainone E., (2021), Identifying deposits' outflows in real-time, Bank of Italy WP 1319. 

(334) 
335 See for instance Keister, T. and C. Monnet (2022), “Central Bank Digital Currency: Stability and Information”, Office of Financial 
Research (OFR) Working Paper, July 2022. 

181 

 
 
                                                           
comparatively  small  role  in  a  non-negligible  share  of  banks,  while  representing  more  than 
60%  of  bank  debt  in  the  most  deposit-dependent  institutions.  It  is  this  category  of  banks, 
highly  reliant  on  retail  funding,  that  is  more  likely  to  be  put  under  pressure  should  an 
unrestricted CBDC design be chosen.   

The  extent  of  the  issue  and  its  impact  on  banks’  intermediation  capacity  is  a-priori 
unclear,  owing  to  a  number  of  uncertainties.  First  and  foremost,  the  demand  for  digital 
euro is unknown and will in any case also depend on digital euro design features that are still 
to be decided and on the environment prevailing at the time of its introduction, including the 
level of interest rates but also the existence of alternative forms of money. Furthermore, it is 
unclear  to  what  extent  digital  euro  demand  would  substantially  replace  cash  or  deposits. 
Lastly,  abstracting  from  digital  euro  demand,  the  impact  of  deposit  outflows  on  bank 
intermediation  and  financial  stability  would  also  depend  on  the  way  banks  react  to  such 
deposit  outflows  and  their  capacity  to  do  so  (see  Box  1).  At the  same  time,  changes  in  the 
financial  landscape  (e.g.  the  emergence  of  decentralised  finance  solutions,  stablecoins,  and 
big  tech  firms  providing  payment  services)  might  disrupt  banks’  intermediation  capacity 
anyway. 

Box 1: Possible bank adjustment mechanisms to deposit outflows 

Generally speaking, banks can adjust to  large-scale deposit  outflows caused by digital  euro 
conversion  via  prices  or  via  balance  sheet  adjustments,  with  potential  negative  effects  on 
banks’ intermediation capacity and profitability. 

In  the  former  case,  banks  would  try  to  compete  with  the  digital  euro  by  offering  higher 
interest on deposits, which could have a variety of (ambiguous) effects. It could squeeze net 
interest  margins  and  therefore  bank  profitability,  with  the  consequence  of  decreasing  loan 
supply or increasing bank risk taking336. Alternatively, higher funding costs could be passed 
through  to  lending  rates,  which  should  have  a  contractionary  effect  on  bank  lending. 
However,  the  results  from  the  literature  point  also  to  the  possibility  of  positive  effects,  for 
instance if a digital euro fosters competition into an oligopolistic banking system.337  

Alternatively, banks could adjust the size and composition of their balance sheets, where as a 
starting  point,  any  conversion  of  deposits  into  digital  euro  would  be  mirrored  by  an 
equivalent  decline  in  reserves,  similar  to  what  happens  in  the  case  of  conversion  to  cash. 
Banks could then react to this in various ways: in first instance by drawing down their excess 
reserve  holdings  with  the  Eurosystem,  which  constitutes  an  attractive  option  particularly  in 
the current environment with high excess liquidity and negative deposit facility rates. Taking 
into consideration individual banks that might have less excess reserves or a possible future 
environment  with  lower  aggregate  reserve  holdings,  banks  could  also  obtain  the  necessary 
reserves  via  loans  from  the  Eurosystem  or,  individually,  via  the  interbank  market.  Lastly, 
banks could theoretically sell assets to the Eurosystem in exchange for reserves. In theory, if 
these different funding sources were perfect substitutes or if banks could draw down reserves 
in  excess  of  their  voluntary  liquidity  buffers,  there  should  be  no  impact  on  banks’ 
intermediation capacity. However, beyond that in practice, there are a number of constraints 
and frictions that would need to be taken into account, such as collateral constraints, frictions 
on interbank markets, regulatory liquidity requirements or banks’ liquidity preferences, all of 

336 
337 
Working Paper, N° 2019-20. 

It is also conceivable that banks expand lending to compensate for lower net interest margins. 
Chiu J., Davoodalhosseini M., Jiang JH., Zhu Y. (2019), Central bank digital currency and banking, Bank of Canada Staff 

182 

 
 
                                                           
which  imply  a  less  seamless  adjustment  and  should  translate  into  higher  funding  costs  and 
thus likely impact bank lending. 

Constraints  and  frictions  can  be  expected  to  be  more  prevalent  in  crisis  and  bank  run 
situations,  where  any  adjustment  mechanism,  including  through  prices,  would  be  severely 
impaired, leading to financial stability risks. 

Besides deposit outflows, banks could be adversely impacted by the digital  euro if they 
were to be crowded out from the payments market. It is difficult to ascertain the role of 
fee  income  connected  to  payments  for  banks’  overall  profitability,  but  according  to  2009 
Capgemini data338, payments represented about 20% of banks global retail revenues and more 
than 50% of core banking fees charged to  clients  in  the euro area, with  large heterogeneity 
across Member States. It is not possible to estimate the potential impact of the digital euro on 
banks’ fee revenue from payment services lacking key inputs and decisions on the design at 
this  stage.  In  the  public  consultation,  PSPs  did  not  provide  concrete  estimates  either. 
Nevertheless a digital euro that is distributed by banks and for which they provide front-end 
solutions would likely partly ameliorate such concerns. While a free digital euro use for basic 
services, including initiating basic transactions, could be considered, banks would in any case 
be able to charge for value-added services. 

In  the  bank-centric  European  economy,  bank  disintermediation  implies  considerable 
risk for firms’ access to credit and thus for overall economic growth, at least during an 
adjustment phase. Banks are currently the only actors able to create money, which enables 
them to engage in large-scale maturity and risk transformation. The euro area economy relies 
on the banking sector for credit provision, more so than for example the US, where market 
financing is more common. In order to avoid adverse effects of large-scale deposit outflows 
on credit provision to the economy, one would either need to ensure that banks have access to 
sufficient replacement funding (see Box 1), or that other financial actors take over (part of) 
the  credit  provisioning  role.  A  financial  system  in  which  investment  banking  and  credit 
provision  is  largely  separated  from  deposit-taking  institutions  could  theoretically  be 
envisioned, akin to some form of “narrow banking”.339 Both options could lead to the loss of 
some  of  the  transformation  functions  of  the  banking  sector  and  negatively  affect  credit 
growth.  While  it  is  a  priori  unclear  whether  an  alternative  system,  in  which  other  financial 
actors partly replace banks in their credit provisioning role, is inferior to the current state, it 
would in any case imply substantial transition costs. While non-bank financial intermediation 
has overall increased since the global financial crisis, it is unclear whether it could replace a 
substantial  part  of  the  banking  sector’s  dominant  role  in  credit  provision  to  the  economy 
going ahead. In any case, any transition towards a more diversified funding landscape for the 
real economy would likely be a long-term process, whereas the digital euro, if unconstrained, 
may pose risks to bank intermediation capacity as soon as it is issued. 

2. Results from ECB simulations 

Illustrative  demand  scenarios  suggest  possible  deposit  outflows  ranging  from  €180 
billion  to  €6.3  trillion,  accounting  for  0.5%  to  18%  of  aggregate  euro  area  bank 
liabilities. A recently published ECB paper340 analyses how euro area banks’ balance sheets 

338https://www.ecb.europa.eu/events/pdf/conferences/integr_innov/Monday_Presentation_1_Lavayssiere.pdf 
339 Depending on the stringency of the model, deposit-taking institutions would be required to match the maturity of their assets and 

liabilities or place the deposits only in highly liquid and safe assets. 

340 Adalid et al. (2022), “Central bank digital currency and bank intermediation”, ECB Occasional Paper Series 293, May 2022 

183 

 
 
 
                                                           
and  activity  might  be  affected  by  the  adoption  of  a  digital  euro.  In  view  of  the  significant 
degree of uncertainty surrounding the design of a potential digital euro, its demand and the 
prevailing environment in which it would be introduced, it calculates illustrative digital euro 
take-up  scenarios  of  the  non-financial  sector,  based  on  assumptions  about  the  degree  of 
substitution between different forms of money in normal times. These scenarios range from 
just  under  €500  billion  digital  euro  take-up  in  a  moderate  demand  scenario  to  just  over  €7 
trillion in a large take-up scenario, with an assumed substitution of deposits of €180 billion 
(0.5% of aggregate bank liabilities) to €6.3 trillion (18% of aggregate bank liabilities) in the 
respective scenarios. They also  include a scenario in  which individual  digital  euro holdings 
are capped at 3000€ and residents collectively exhaust their limits (leading to a total demand 
of €1 trillion, of which €647 billion are assumed to be converted from deposits).  

Chart 1: ECB hypothetical digital euro demand scenarios 

Source: ECB occasional paper 293 

Note that different assumptions are made by the ECB on the take up by the different institutional sectors, with households 
having the largest take-up, followed by non-financial companies (“NFC”) and non-banking financial operators. 

Matching the demand scenarios with bank balance sheet data suggests that the banking 
sector could easily accommodate the moderate demand scenario in quantitative terms, 
whereas  under  the  large  unconstrained  demand  scenario,  the  Eurosystem  would  be 
required to step in to a significant extent. Whereas under moderate deposit outflows, banks 
could  absorb  the  associated  reserve  reduction  on  aggregate  through  its  excess  reserve 
holdings (and via interbank lending on an individual level), under the large demand scenario, 
those  buffers  would  be  exhausted,  requiring  significant  reserve  provision  through  the 
Eurosystem.  Under  current  circumstances,  it  is  estimated  that  enough  unencumbered 
collateral  would  be  available  to  the  banking  sector  as  a  whole  to  provide  Eurosystem 
financing.  The  rough  estimations  linked  to  the  “capped”  scenario  suggest  that  an  optimal 
combination  of  available  adjustment  channels  could  still  be  compatible  with  an  orderly 

184 

 
 
 
adjustment  process,  although  the  distance  to  the  overall  feasible  adjustment  limit  would  be 
reduced. It should be noted that the simulations are predicated on the current environment of 
high excess reserves, which should ease adjustment in all possible scenarios as the banking 
sector  could  accommodate  a  large  amount  of  deposit  outflows  by  drawing  down  excess 
reserve holdings. 

However, the presence of frictions and constraints in the adjustment process needs to be 
taken  into  account  and  would  imply  higher  bank  funding  costs  in  most  demand 
scenarios.  The  lack  of  perfect  substitutability  between  banks’  funding  sources  may  affect 
bank funding costs. Such constraints and frictions  concern inter alia interbank markets (e.g. 
higher  money  market  rates  associated  with  lower  levels  of  excess  liquidity  and  increased 
interbank  borrowing)  or  Eurosystem  borrowing  (e.g.  stigma,  collateral  scarcity  or  liquidity 
requirements).   

A  simulation  of  optimal  bank  responses  to  different  digital  euro  demand  scenarios 
confirms that a moderate take-up would be easily accommodated by banks, whereas a 
large take-up would force banks’ to rely on Eurosystem funding. Individual banks face a 
trade-off  between  balancing  their  profitability  and  liquidity  risks  when  deciding  about  the 
relevant  adjustment  channels.  For  instance,  secured  funding  is  generally  cheaper  than 
unsecured  funding  but  will  impact  banks’  liquidity  position.  Similarly,  there  is  a  trade-off 
between  the  costs  associated  with  the  maturity  profile  of  funding  and  roll-over  risks.  The 
ECB paper simulates banks’ optimal adjustment under the different demand scenarios using 
an optimisation model in which a bank is expected to minimise its funding costs, subject to 
liquidity-,  collateral-  and  reserve  constraints.  Concurrent  with  the  static  balance  sheet 
analysis,  the  simulation  suggests  that  for  low  levels  of  digital  euro  demand,  most  banks 
would  be  able  to  accommodate  deposit  outflows  through  their  own  reserves  without 
excessively drawing down their voluntary liquidity buffers.341 For the high demand scenario, 
banks  would  need  to  rely  on  central  bank  funding  as  excess  reserves  would  be  exhausted, 
with a large amount of central bank funding having to be met by using long-term central bank 
funding  secured  by  non-High  Quality  Liquid  Assets  (“HQLA”).  Under  the  “capped” 
scenario, outflows would also overwhelmingly be met by excess reserve reductions, with an 
estimated 6% of demand met via interbank funding.  

Chart  2:  ECB  simulation  of  banks’  balance  sheet  re-optimisation  following  deposit 
outflows into CBDC 

341  Only  2%  of  digital  euro  demand  would  be  accommodated  via  interbank  funding,  reflecting  individual  banks’  reserve  constraints  or 
liquidity preferences. 

185 

 
 
                                                           
Source: ECB occasional paper 293 
Scenario  A  refers  to  the  moderate  demand  scenario,  Scenario  B  to  the  large  demand  scenario,  and  Scenario  C  to  the 
scenario with individual holdings capped at €3000, which are collectively exhausted.  

Bank  run  simulations  suggest  that  an  unconstrained  digital  euro  could  increase  the 
scale  and  speed  of  economy-wide  bank  runs.  Using  the  historic  precedents  of  systemic 
bank runs in Greece (2015) and Cyprus (2013), banks runs are simulated in the presence of a 
digital  euro  under  the  various  digital  euro  take-up  scenarios  discussed  above.  Given  that  a 
digital euro would provide citizens with a credit risk-free asset at comparatively low storage 
costs,  the  simulations  show  that  it  would  lead  to  an  increase  in  the  scale  and  speed  of  a 
(simulated)  system-wide  bank  run  compared  to  the  no  digital  euro  scenario.  Specifically, 
whereas  in  the  ‘no  digital  euro’  scenario,  30%  of  Greek  banks’  August  2014  deposits  had 
been withdrawn at the intervention time in June 2015, the withdrawals at intervention amount 
to  40%  and  90%  in  the  large-demand  scenario  and  the  moderate-demand  scenario, 
respectively. Both scale and speed of the bank run would be larger under the moderate take-
up  scenario  (compared  to  the  large-take  up  scenario),  owing  to  the  fact  that  a  smaller 
substitution from bank deposits into digital euro would have taken place under this scenario 
in normal times, before the bank run occurs. 

Holding  limits,  remuneration  disincentives  and  conversion  limits  can  lower  the  scale 
and  speed  of  the  simulated  economy-wide  bank  runs.  The  overall  effect  in  comparison 
with a no digital euro scenario, however, depends on the calibration of these tools. A €3,000 
individual  holding  limit  for  instance  would  more  than  compensate  any  negative  impact  a 
digital euro could potentially have on the scale and speed of simulated economy-wide bank 
runs, given that the aggregate level of available deposits that can be withdrawn in the event of 
an  economy-wide  run  is  lower  than  under  the  no  digital  euro  scenario.  For  remuneration-
based  tools,  the  simulations  suggest  that  adverse  interest  rate  incentives  would  need  to  be 
very  strong  to  have  a  similar  effect.  For  instance,  for  a  €3000  tier-1  threshold,  even  tier-2 
remuneration  of  -12%  would  not  achieve  an  improved  outcome  to  the  no  digital  euro 
scenario.  Finally,  limits  on  CBDC  convertibility  are  tested  as  complements  to  limits  on 
individual holdings, with lower convertibility limits leading to less severe bank runs.  

186 

 
 
 
Chart 3: ECB simulated cumulated deposit withdrawals in Greece under various limits 
to digital euro store of value function 

Source: ECB occasional paper 293 

4.  Commission internal analysis (COM-JRC)   

4.1.  Macroeconomic analysis 

187 

 
 
 
 
 
 
The possible macroeconomic impact of introducing CBDC was analysed with a dynamic 
stochastic general equilibrium (DSGE) model developed within the Commission by the 
JRC.  The  model  builds  on  an  estimated  DSGE  model  for  the  euro  area  (Kollmann  et  al., 
2013),342  featuring  a  banking  sector,  where  money  in  the  form  of  cash  and  CBDC  is 
introduced in a calibrated way.  These two instruments, which are considered to be imperfect 
substitutes,  provide  liquidity  and  payment  services  to  households  in  a  money-in-utility 
framework,  with  cash  having  the  inconvenience  of  carrying  storage  costs.  Non-liquidity 
constrained households also have access to deposits, which are primarily a means of saving. 

The presence of CBDC (in addition to cash) generally produces only small changes in an 
economy’s  dynamic  responses  to  standard  macroeconomic  shocks.  As  regards  the  most 
noticeable  differences  deriving  from  the  presence  of  CBDC,  the  response  to  a  permanent 
positive shock to total factor productivity (TFP) leads to a higher demand for money, of both 
the physical type and of CBDC. In fact, with CBDC present, money provides better services 
to households, which are therefore more willing to increase holdings in order to transact the 
TFP-induced  consumption  boost.  Likewise,  the  reaction  of  money  demand  to  a  positive 
public  consumption  shock  is  somewhat  more  pronounced  in  an  economy  endowed  with 
CBDC.  As  regards  a  policy  rate  increase,  it  tends  to  lower  money  demand  by  raising  its 
opportunity  cost  and  by  decreasing  consumption  and  related  transactions.  This  effect  is 
concentrated  on  cash  demand  in  the  case  where  CBDC  supply  is  subject  to  an  active 
constraint.  Overall,  fluctuations  of  money  in  the  economy  can  be  driven  to  an  important 
extent by CBDC if the supply of the latter is unconstrained; otherwise, these fluctuations tend 
be somewhat weaker, being driven mainly by changes in cash holdings. 

A bank run is always detrimental to the economy, whether CBDC is present or not. In 
case the supply of CBDC is constrained, the macroeconomic impact of a deposit run is 
similar  to  the  case  of  a  cash-only  economy.  A  bank  run  negatively  impacts  growth, 
consumption, investment, lending and bank profits. It tends to be deflationary in the model and leads 
to an increase in the interest rate on deposits, as well as in real interest rates more generally. In case 
CBDC holdings are constrained (and household balances are already close to, or at maximum limits), 
deposits cannot be substituted for CBDC, implying that the macroeconomic impact of a bank run is 
similar to that in a cash-only economy. 

Turning now to the case where households increase their relative preference for holding 
CBDC,  this  leads  to  an  increase  in  CBDC  at  the  expense  of  cash  and  to  a  modest 
depressive  effect  on  activity,  under  the  assumption  that  the  increased  demand  for 
CBDC is accommodated by the monetary authority. Given that total money demand also 
increases in the model (as CBDC is more efficient by not carrying storage costs), this  has a 
modest  negative  effect  on  aggregate  consumption,  investment,  output  and  inflation,  as 
households redirect a part of their disposable income to increase their CDBC stock. 

As  regards  transition  dynamics  from  a  cash-only  economy  to  one  endowed  with  a 
limited amount of CBDC, the expected introduction of the latter instrument at a point 
in  the  future  has  a  minor  impact  on  agents’  behaviour.  There  is  a  small  increase  in 
economic activity and a small reduction in cash balances ahead of the introduction of CBDC, 
with  most  of  this  reduction  occurring  only  at  the  moment  when  CBDC  is  made  available. 
Bank  deposits  also  show  very  muted  dynamics.  These  simulations  compare  with  the  case 
where  the  supply  of  CBDC  is  increased  unexpectedly  from  an  initial  constrained  position. 
Although CBDC holdings rise in both cases, the unexpected nature of the increase in CBDC 

342 Kollmann, R., Ratto, M., Werner, R., and in′t Veld, J., 2013. “Fiscal policy, banks and the financial crisis”, 
Journal of Economic Dynamics and Control, Volume 37, Issue 2, 2013, Pages 387-403, https://doi.org/10.1016/j.jedc.2012.09.007. 

188 

 
 
                                                           
has a small depressive effect on economic activity as agents immediately redirect resources 
towards CBDC holdings. 

It should be noted that the DSGE analysis presented in this section does not consider the 
possible  negative  consequences  of  inaction,  as  mentioned  in  this  impact  assessment. 
Other limitations of the analysis include the fact that no international effects are considered 
(i.e., there is no foreign demand for, nor cross-border supply of a European CBDC) and that 
possible efficiency gains from digitalisation are not explicitly evaluated (although the storage 
costs associated with cash mean that efficiency gains are not entirely disregarded either). 

4.1.1.  Macroeconomic analysis in the literature 

In  assessing  the  macroeconomic  implications  of  a  CBDC,  a  recent  and  growing  literature 
makes  use  of  DSGE  modelling,  mainly  focusing  on  the  trade-off  between  its  potential 
benefits,  as  an  easy  and  safe  means  of  payment  competing  with  cash  and  deposits,  and  its 
bank  disintermediation  risks,  which  can  materialise  through  deposit  substitution.  Some 
examples of this literature include Burlon et al. (2022),343 Ferrari et al. (2022),344 Schiller and 
Gross (2021)345 and Barrdear and Kumhof (2021).346 

Burlon et al. (2022) develop a DSGE model able to replicate some of the empirical evidence 
on the impact of digital euro-related news on bank stock prices and lending behaviour. The 
model features imperfect substitutability between CBDC, cash and deposits, and incorporates 
key  transmission  mechanisms  through  which  CBDC  can  affect  the  banking  system  and  the 
real economy. The model also explores alternative welfare maximizing policy rules to obtain 
a range of values of the optimal amount of CBDC issued. The paper also analyses the cyclical 
consequences of supplying CBDC under these optimal policy rules. The relevant results are 
as  follows.  First,  a  proper  design  of  CBDC  issuance  is  crucial  to  limit  the  impact  on  the 
banking  system.  Second,  CBDC  issuance  generates  bank  disintermediation  through  the 
corresponding  expansion  of  the  central  bank  balance  sheet  and  profits.  Third,  the  optimal 
CBDC rules are effective in mitigating the trade-off between liquidity services and the risk of 
bank disintermediation, therefore generating significant welfare gains across consumers.  

Ferrari et al. (2022) construct a two-country DGSE model to analyse the international macro-
financial implications of the introduction of CBDC. The model relies on Eichenbaum  et  al. 
(2021)347  and  is  modified  to  include  CBDC  as  a  monetary  asset  competing  with  cash  and 
deposits. In this model, CBDC is a hybrid instrument: it is both a means of payment (with no 
storage  costs  and  easily  scalable)  and  a  remunerated  asset  (like  bonds  and  deposits). 
Importantly, the CBDC can be traded internationally. This implies that the CBDC issued in 
the  domestic  economy  can  be  used  in  the  foreign  economy.  They  find  three  main  results. 
First,  the  presence  of  CBDC  induces  stronger  international  spillovers,  thereby  increasing 
international  linkages  in  a  significant  manner.  Second,  the  CBDC  design  is  crucial  in 

343 Burlon, Lorenzo, Montes-Galdon, Carlos, Muñoz, Manuel A. and Smets, Frank, 2022. "The optimal quantity of CBDC in a bank-based 
economy," CEPR Discussion Paper 16995. 
344  Ferrari  Minesso,  Massimo,  Mehl,  Arnaud  and  Stracca,  Livio,  2022.  "Central  bank  digital  currency  in  an  open  economy,"  Journal  of 
Monetary Economics, Elsevier, vol. 127(C), pages 54-68  
345 Schiller, Jonathan and Gross, Jonas, 2021. "A Model for Central Bank Digital Currencies: Implications for Bank Funding and Monetary 
Policy," VfS Annual Conference 2021: Climate Economics 242350, Verein für Socialpolitik / German Economic Association.  
346 Barrdear, John and Kumhof, Michael, 2021. "The macroeconomics of central bank digital currencies," Journal of Economic Dynamics 
and Control. 
347  Eichenbaum,  M.  S.,  Johannsen, B. K.  and Rebelo,  S.  T., 2021.  "Monetary  Policy  and the  Predictability  of  Nominal  Exchange  Rates," 
Review of Economic Studies, Oxford University Press, vol. 88(1), pages 192-228. 

189 

 
 
                                                           
magnifying these effects. Third, the presence of CBDC has significant effects on the optimal 
monetary  policy  in  the  two  economies,  and  is  able  to  strengthen  asymmetries  across 
countries. 

Schiller and Gross (2021) build a DSGE model with CBDC and a financial sector to study the 
CBDC dynamics and the relevant transmission effects during a financial crisis, as well as the 
disintermediation potential for the financial sector. The model relies on the original Gertler 
and Karadi (2011)348 model but includes CDBC in household preferences, bank deposit risks 
in  crisis  times  and  the  possibility  of  central  bank  refinancing  of  banks.  In  particular,  they 
consider two alternative forms of CBDC issuance: interest- and non-interest-bearing CBDCs 
in the context of financial crises and in the presence of an effective lower bound for policy 
rates.  They find that the presence of CBDC substantially reduces bank  funding, leading to 
bank disintermediation. Nonetheless, they find that this result is conditional on the presence 
of  an  effective  lower  bound  and  on  the  role  on  the  central  bank,  which  could  compensate 
deposit losses by providing banks with additional funds. 

Barrdear  and  Kumhof  (2021)  study  the  macroeconomic  effects  of  introducing  a  CBDC  by 
constructing  a  DGSE  model  designed  to  capture  most  of  the  relevant  real  and  financial 
transmission channels. These key features include imperfect substitutability between CBDC 
and  bank  deposits,  the  endogenous  creation  of  bank  deposits  through  collateralized  loans, 
CBDC issuance arrangements that prevent direct runs from bank deposits into CBDC, and the 
conduct of monetary policy through separate channels, such as the standard risk-free policy 
rate  on  reserves,  and  the  interest  rate  on,  or  the  quantity  of  CBDC.  They  find  that  the 
injection  of  CBDC  in  the  economic  system  might  yield  sizable  output  gains  provided  that 
CBDC  issuance  is  well  designed.  Furthermore,  countercyclical  CBDC  issuance  would 
improve the central bank’s ability to stabilise the business cycle. 

348 Gertler, Mark and Karadi, Peter, 2011.  "A model of unconventional monetary policy,"  Journal of Monetary Economics, Elsevier, vol. 
58(1), pages 17-34, January. 

190 

 
 
 
 
                                                           
4.2.  Banks balance sheet analysis  

Expanding the analysis made by the ECB (Adalid et al. 2022), the study by the JRC assesses 
the implications of take-up scenarios ranging from 1,000€ to 14,000€ per person on a bank-
by-bank and country-by-country basis. The assumption is that half the current amount of cash 
held by individuals in substituted with digital euros before individuals exchange deposits to 
digital euros.  

Chart  4:  Share  of  customer  deposits  and  wholesale  funding  in  banks’  total  liabilities 
(TL) 

Euro-area  banks,  non-consolidated  and 
consolidated balance sheets 

Euro-area banks, ratios per banks’ size group 

Deposits  are  a  very  important  source  of  funding  for  banks:  the  median  of  deposits  funding 
across the whole sample of banks for the euro area stands at around 75% of banks’ liabilities. 
Larger banks seem to rely less on deposit funding than smaller banks, with a median of about 
65%, versus a median of about 80% and 90% for medium and small sized banks respectively. 
The  study  shows  that  the  share  of  total  deposits  that  would  be  substituted  for  digital  euros 
would differ widely across Member States. For instance, the 3,000€/person take-up scenario 
would lead to  the substitution  in  a range between less than 1% and  24% of deposits  across 
euro area members.  

191 

 
 
 
 
 
 
 
 
Chart 5: Distributions of the ratio of Total Liabilities to the deposit conversion shock in 
different take-up scenarios  

Euro-area banks, as a share of the number of banks in sample, unconsolidated balance sheets 

This  chart  shows  the  cumulative  distribution  of 
banks  compared  to  the  Total  liabilities/deposit 
withdrawal  ratio  in  different  take-up  scenarios, 
each scenario being represented by a curve.  

Reading:  in  the  3k€  demand  scenario  (dark 
green  line),  total  liabilities  amount  to  less  than 
20  times  the  deposit  shock  for  10%  of  banks 
while 90% of banks have total liabilities of over 
20 times the deposit shock. This is equivalent to 
saying  that  the  deposit  shock  represents  less 
than 5% of total liabilities for 90% of banks. 

This chart shows the cumulative distribution 
of euro-area banks’ total assets compared to 
their  Total 
liabilities/deposit  withdrawal 
ratio  in  the  3k  take-up  scenario.  Each  bank 
is  represented  as  a  circle  whose  size  is 
proportionate  to  the  bank’s  total  balance 
sheet  size.  The  horizontal  lines  represent 
three  different  thresholds  in  terms  of  total 
liabilities  (10  times,  20  times  and  50  times 
the deposit shock).  

Reading: banks representing around 10% of 
euro-area banks’ total assets have liabilities 
of  less  than  20  times  the  deposit  shock  that 
would  occur  in  a  3k€  take-up  scenario.  In 
another way, in the 3k€ take-up scenario, the 
shock  to  banks’  deposits  would  represent 
more  than  5%  of  total  liabilities  for  banks 
representing  10%  of  euro-area  banks’  total 
assets. 

The analysis also  highlights  the impact  of the substitution from  deposits to  digital  euros on 
banks’  balance  sheets.  In  the  case  of  the  3,000€/person  take-up  scenario,  made  for 
comparability with the ECB analysis presented above, the shock to deposits would amount to 
less  than  5%  of  banks’  total  liabilities  for  90%  of  the  euro  area  banks,  with  a  maximum 
impact of less than 25% of liabilities. For the 5,000€ and 10,000€ take-up scenarios, 10% of 
banks would face a shock bigger than 25% and 50% of their total liabilities, respectively. In 
the latest scenario, only about  10% of all banks would face a shock amounting to less than 
10%  of  their  total  liabilities.  In  aggregate  terms,  it  should  be  noted  that,  in  the  scenario  in 
which  the  average  take-up  is  3000  euros,  the  banks  potentially  facing  a  shock  to  deposits 
larger than 10% of their total liabilities hold less than 1% of total assets in the banking sector 

192 

 
 
 
 
 
 
 
in the overall sample considered, while banks potentially facing a shock to deposits between 
5%  and  10%  of  their  total  liabilities  hold  less  than  10%  of  all  total  assets  in  the  overall 
sample. However, it should be stressed that banks facing larger shocks seem to be relatively 
concentrated in a small number of countries.  

Regarding banks possible reactions and room for manoeuvre for coping with a withdrawal of 
deposits, the study highlights the extent to which banks would be able to use their reserves or 
wholesale  funding.  In  the  3,000€/person  take-up  scenario,  banks  representing  about  5%  of 
total assets in the euro area would not be able to cover the shock with their free reserves and 
banks  representing  about  15%  of  total  assets  in  the  euro  area  would  have  in  their  balance 
sheet an amount of free reserves, which is less than twice the shock.  

Chart 6: Distributions of the ratio of banks’ reserves to the deposit conversion shock in 
different take-up scenarios 
Euro-area banks, as a share of the number of banks in sample, unconsolidated balance sheets 

This chart shows the cumulative distribution 
of banks compared to their reserves/deposit 
withdrawal ratio in different take-up 
scenarios, each scenario being represented 
by a curve.  

Reading: in the 3k€ demand scenario (dark 
green line), banks’ reserves amount to less 
than twice the deposit shock for 15% of 
banks.  

Considering consolidated balance sheets, in several Member States, over half of banks would 
have  to  increase  wholesale  funding  by  more  than  20%  in  order  to  compensate  the  loss  of 
deposits.  At the euro-area aggregate level,  30%  of banks would need to  increase wholesale 
funding by less than 10% (in relative terms, compared to current levels), 50% of banks would 
need to increase it by less than 20%, but 25% of banks would need a large increase of more 
than  50%.  The  disparity  between  Member  States  is  quite  marked,  even  more  when 
considering un-consolidated data. This was to be expected given the possible structure of the 
interbank  market  as  a  hub-spoke  network.  Hence,  the  analysis  points  to  considerable 
heterogeneity across countries, size classes and institutions. While the overall shock could not 
be large in the scenarios where the take-up is limited, the full dynamic effect of changes in 

193 

 
 
 
 
 
 
 
the liability side to shocks following the introduction of a digital euro could be nuanced and 
more complex than the first round impacts, leading to the formation of position rents and the 
exchange of income streams across banks in different size classes or countries.  

Chart 7: Distributions of the ratio of banks’ wholesale funds to the deposit conversion 
shock in different take-up scenarios 
Euro-area banks, as a share of the number of banks in sample, unconsolidated balance sheets 

3.3  Bank profitability analysis  

The  analysis,  conducted  by  the  JRC,  shows  that  a  digital  euro  might  lead  to  substantial 
challenges  for  the  profitability  of  banks,  especially  for  small  banks  that  mostly  rely  on 
deposits  as  a  source  of  funding.  Large  banks  and  countries  where  the  banking  business  is 
more diversified are less vulnerable to the introduction of the digital euro. 

In  order  to  investigate  the  link  between  the  adoption  of  the  digital  euro  and  banks’ 
profitability,  the  study  assesses  the  extent  to  which  banks  rely  on  deposits  as  a  source  of 
profits.  Banks  are  largely  funded  by  deposits,  which  represent  the  cheapest  alternative  to 
wholesale funding or capital markets. However, the importance of deposits in bank funding 
varies across Member States and depends on banks’ sizes. The median amount of deposit per 
household varies substantially across Europe, from more than 20K EUR for Luxembourg, to 
less than 300 EUR for Latvia. Hence, even with a relatively small take-up of 2,000 EUR per 

194 

0123456789100.1.2.3.4.5.6.7.8.90.1.2.3.4.5.6.7.8.9SoloCons.3k scenario3k scenarioWholesale funds / depshk3k, CAP AT 10Share of total assets (EA)Graphs by Consolidation indicator 
 
 
 
 
 
 
 
 
 
household, banks from certain small euro area members would experience a drop in deposits 
of more than 10%.  

The  assessment  of  a  shock  to  deposits  on  bank  profitability  is  based  on  quantile  panel 
regressions with fixed effects. A shock is introduced in the deposit to asset ratio in order to 
mimic  the  effect  of  the  introduction  of  the  CBDC  as  a  substitute  for  deposits.  The  study 
replicates  the  three  demand  scenarios  of  the  ECB’s  paper  quoted  above  (Adali  et  al.  2022) 
and assesses how profitability indicators, namely the return on assets (ROA) and the return 
on equity (ROE), react to these shocks.  

The moderate take-up  scenario leaves  the ROE distribution of the panel  of euro area banks 
substantially unaffected. The 3,000€ capped scenario leads to  a decrease of the ROE of the 
representative large euro area bank from 4.3% to 4.1%. Under the large take-up scenario, the 
average value for the ROE decreases substantially, up to 2.7% for a large bank. Small banks 
appear  to  be  the  most  penalized.  Their  ROE  in  the  large  take-up  scenario  would  decrease 
from an average value of 3.7% to 2.4%. Hence, the “capped” scenario appears to be a good 
compromise  to  preserve,  to  some  extent,  both  the  stock  of  deposits  and  the  inherited 
profitability  that  comes  from  their  (cheaper)  funding  for  the  banks.  Findings  are  similar, 
albeit with a different magnitude, when considering the ROA. 

As a caveat, this analysis should be considered as a static assessment on what might happen 
when  banks  face  a  reduction  of  deposits  due  to a  substitution  with  digital  euro.  It  does  not 
provide a modelling of banks’ possible reaction to the introduction of a digital euro. 

195 

 
 
 
 
Annex 12 - Applying Union data protection law to the digital 
euro 

Section 1: Introduction  

The  regulation  establishing  a  digital  euro  must  ensure  full  compliance  with  Union  data 
protection  law  and  the  protection  of  fundamental  rights,  as  enshrined  in  the  Charter  of 
Fundamental  Rights  of  the  European  Union.349  Regulation  (EU)  2016/679350  (GDPR)  and 
Regulation  (EU)  2018/1715351  (EUDPR)  will  apply  to  the  distribution  and  use  of  a  digital 
euro when personal data is processed.  

Irrespective  of  the  design  of  a  digital  euro,  strict  adherence  with  applicable  data  protection 
rules remains a core feature and condition when personal data is processed.352 The regulation 
establishing  a  digital  euro  will  embed  the  principles  of  data  protection  by  design  and  data 
protection  by  default  in  accordance  with  Article  25  of  the  GDPR.  Strong  data  protection 
safeguards  will  be  established,  particularly  concerning  the  principles  of  purpose  limitation, 
data minimisation, storage limitation and integrity and confidentiality pursuant to Article 5 of 
the GDPR.  

Assigning the tasks of a controller and processor: 

The  regulation  establishing  a  digital  euro  will  lay  down  the  respective  roles  and 
responsibilities of the involved entities in issuing and distributing the digital euro from a data 
protection  perspective,  most  notably  those  of  the  ECB/Eurosystem  and  supervised 
intermediaries. This will be done taken into account the respective purpose(s) and/or the tasks 
in the public interests.  

Data protection legislation use the concepts of a controller, joint controller and processor353 to 
assign responsibility to comply with EU data protection requirements, and make it clear vis-
à-vis whom data subjects can exercise their rights.  

-  A controller means the natural or legal person, public authority, agency or other body 
which,  alone  or  jointly  with  others,  determines  the  purposes  and  means  of  the 
processing  of  personal  data;  where  the  purposes  and  means  of  such  processing  are 
determined by Union or Member States law, the controller or the specific criteria for 
its nomination may be provided by Union or Members States law. 

-  A processor means a natural or legal person, public authority, agency or other body 

which process personal data on behalf of the controller.  

349 The regulation must respect the principles enrhsined in the Charter, in particular Articles 7 and 8 on the right to respect for private life 
and the right to the protection of personal data. 
350 Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with 
regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection 
Regulation), OJ L 119, 4.5.2016, p. 1–88. 
351 Regulation (EU) 2018/1725 of the European Parliament and of the Council of 23 October 2018 on the protection of natural persons with 
regard to the processing of personal data by the Union institutions, bodies, offices and agencies and on the free movement of such data, and 
repealing Regulation (EC) No 45/2001 and Decision No 1247/2002/EC, OJ L 295, 21.11.2018, p. 39–98. 
352 Recital 15 ‘In order to prevent creating a serious risk of circumvention, the protection of natural persons should be technologically 
neutral and should not depend on the techniques used.’ EUR-Lex - 32016R0679 - EN - EUR-Lex (europa.eu) 
353 See EDPB guidelines 07/2020 on the concepts of controller, joint controller and processor in the GDPR. 

196 

 
 
 
 
 
 
 
                                                           
Determining  the  respective  roles  and  responsibilities  of  the  relevant  entities  is  essential  to 
ensure that the personal data processing in regards to the activities of  a digital euro comply 
with applicable EU data protection legislation.  

In the context of a digital euro, the ECB/Eurosystem and supervised intermediaries could act 
as controllers, joint controllers and processors depending on the task in public interests as per 
Article 6(1)e of the GDPR attributed to them, or when necessary for the compliance  with a 
legal obligation as per Article 6(1)(c) of the GDPR. In this view, several  possibilities could 
be considered. Part 2 of this Annex provides an overview of the main activities for which the 
controller could be assigned by Union law. Other activities related to a digital euro may rely 
on other lawful grounds for processing as defined in Article 6(1) GDPR, for example when 
processing  is  necessary  for  the  performance  of  a  contract.  To  the  extent  necessary  for  this 
impact assessment these activities are also outlined to in Annex 12 (see for example Section 
2.7).  

Purpose of processing/tasks in public interests: 

Article 5(2) of the EUDPR and Article 6(3) of the GDPR require Union law that lay down the 
lawful ground for processing identify the purpose of processing, or the task in public interests 
for which the processing is necessary. Certain tasks or obligations related to the distribution 
and  use  of  the  digital  euro  will  involve  the  processing,  including  storage  and  sharing  of 
personal data. 

The processing of personal data may be necessary, while fully respecting the requirements of 
the Charter, for the purposes or tasks laid down in the regulation establishing a digital euro. 
Such tasks or purposes which are considered essential include:  

-  Payment settlement (incl. funding and defunding) 
-  Combating payment fraud  
-  Ensuring holding limits and/or conversion limits  
-  Combatting money laundering and terrorist financing (AML/CFT)  
-  Taxation and combatting tax avoidance   
-  Managing operational and security ICT risks 
-  Enabling data-driven ancillary services  

Part  2:  Activities  established  in  the  Regulation  which  may  require  processing  of 
personal data 

2.1. 

 Provision of payment services and settlement  

Purpose of processing: 

Personal  data may be processed for the proper functioning of payment  services related to  a 
digital  euro,  notably  purposes  of  conducting  and  settling  transactions  between  end  users 
(payer and payee).354 This includes funding and defunding digital euro wallets and accounts. 
Pseudonymised transaction data may be processed for the purpose of protecting the integrity 
of digital euro issuance as a direct liability of the  ECB/Eurosystem. Such processing would 
be necessary in order to safeguard the amount of digital euro in circulation. 

Personal data transfers: 

354 The digital euro would be treated as funds under Article 4(25) PSD2, which would regulate the processing of personal data. EUR-Lex - 
32015L2366 - EN - EUR-Lex (europa.eu)  

197 

 
 
 
 
 
                                                           
To  the  extent  that  international  data  transfers  would  take  place  in  the  context  of  payment 
services  (Policy  Options  4a-b),  respect  for  data  protection  also  involves  strict  compliance 
with the rules on international transfers of personal data as set out in the EU data protection 
framework. In particular, supervised intermediaries transferring personal data outside the EU 
shall comply with the rules on international data transfers set out in Chapter V GDPR. To the 
extent ECB/Eurosystem is involved in a transfer of personal data to a third country, Chapter 
V EUDPR shall apply.  

Controllers: 

If  payments  are  validated  online  (as  discussed  in  Option  2c),  payments  activities  could  be 
managed  by  supervised  intermediaries,  and  settled  by  the  ECB/Eurosystem.  Supervised 
intermediaries,  acting  as  payment  service  providers  for  end  users  (the  payer  and  payee), 
would determine the means of processing as the controller at the front-end of the payments 
process. Supervised intermediaries would  act  as controllers for user-facing activities related 
to payment services. This includes opening digital euro accounts and managing transactions 
of  users,  as  well  as  the  funding  and  defunding  digital  euro  wallets  and  accounts.  For  the 
provision  of payment  services linked to  funding  and defunding of  a digital  euro account  or 
wallet, personal data may be processed to carry out AML/CFT checks, upon the instruction of 
supervised intermediaries. On this see more under Section 2.4. 

The Eurosystem as the provider of the settlement infrastructure may process transaction data 
necessary  to  validate  and  record  transactions  of  digital  euro  as  part  of  the  back-end  of  the 
payments process (i.e. settlement). For these purposes, the ECB/Eurosystem would determine 
the means of processing as the controller. Privacy enhancing techniques (PETs) would ensure 
that personal data is pseudonymised so that data processed cannot be directly attributed to an 
identified  or  identifiable  digital  euro  user  by  the  ECB/Eurosystem.  Moreover,  clear 
segregation  of  data  between  the  supervised  intermediaries  and  the  ECB/Eurosystem  would 
effectively delink the ECB/Eurosystem from users of a digital euro to render it impossible for 
the  ECB/Eurosystem  to  attribute  personal  data  to  individual  users  of  digital  accounts  and 
holdings.  

If payments are validated offline (as discussed in Option 2d), payment-processing activities 
could  be  managed  and  settled  at  the  level  of  user  devices  (e.g.  smartphone  or  cards). 
Transactions  of  offline  digital  euro  would  take  place  without  internet  connectivity  on  a 
person-to-person basis (between payer and payee) and settlement would rely on local storage 
without  the  involvement  of  a  third  party.  Payment  settlement  may  therefore  occur  without 
intermediation  by  a  supervised  intermediary  or  the  ECB/Eurosystem  to  manage  or  validate 
the  transaction.  Neither  the  ECB/Eurosystem  nor  intermediaries  would  directly  process 
personal  data  for 
the 
ECB/Eurosystem,  which  would  bear  the  responsibility  that  these  means  comply  with  data 
protection by design and by default, including by implementing principles of data protection 
as per Article 5 GDPR. 

  Offline  validation  would  be  developed  by 

this  purpose. 

Categories of personal data processed:  

Personal data processed for the provision of payment services and the purposes of payment 
settlement  may  include  those  in  the  interbank  payment  dataset  (IBAN,  name  of  originator, 
name of beneficiary, numerical value of transaction, settlement date).355  

355 European Payments Council, SEPA Credit Transfer Scheme Rulebook, March 2020.  

198 

 
 
                                                           
2.2  

Payment fraud 

Purpose of processing: 

The  processing  of  personal  data  may  be  necessary  for  the  purposes  of  the  prevention  of 
payment fraud (see also Article 94 of PSD2356).  

Controllers: 

Supervised intermediaries, acting as payment service providers for end users (the payer and 
payee),  could  be  tasked  with  the  prevention,  investigation  and  detection  of  payment  fraud 
related to a digital euro.  

Categories of personal data processed: 

Personal  data  processed  for  the  provision  of  the  prevention  of  payment  fraud  will  include 
information  about  the  customer's past  and present  transactions, including  the amount spent, 
time of the transaction, payment methods used, and location of the transaction. 

2.3   Enforcing holding limits and/or conversion limits  

Purpose of processing: 

The  processing  of  personal  data  for  the  purposes  of  enforcing  holding  limits  related  to  a 
digital  euro  would  be  necessary  to  protect  financial  stability  and  the  banking  sector’s 
intermedia  ration  capacity,  notably  to  prevent  excessive  shifts  of  commercial  bank  money 
into digital euro.357  

Controllers: 

Holding  limits  would  be  enforced  by  supervised  intermediaries  acting  as  payment  service 
providers. This may include having access to a repository of end user data (personal data of a 
user  related  to  transactions  referred  to  in  Section  2.1),  to  verify  if  a  user  already  possesses 
holdings in digital euro.  Alternatively, holding limits could be programmed and enforced at 
the level of the user device itself.  

 Categories of personal data processed: 

Personal data processed for the provision of the enforcement of holding limits will be a user’s 
identity data, and a user’s transaction data (personal data of a user related to transactions, as 
referred to in Section 2.1).  

356 This includes malicious or fraudulent activity and security incidents. As per Article 94 PSD2 EUR-Lex - 32015L2366 - EN - EUR-Lex 
(europa.eu) 
357 The financial stability purpose of holding limits is discussed in the Eurosystem’s report on a digital euro, p. 28 Report on a digital euro 
(europa.eu)  

199 

 
 
 
 
                                                           
2.4   AML/CFT  

Purpose of processing: 

The processing of personal data for the purposes of the prevention of money laundering and 
terrorist  financing  is  recognised  as  a  matter  of  public  interest  for  which  processing  may  be 
necessary.358  In  the  context  of  a  digital  euro,  the  processing  of  personal  data  may  be 
necessary  for  the  activities  currently  required  under  the  AML/CFT  framework359,  such  as 
carrying out the appropriate level of customer due diligence, reporting unusual and suspicious 
transactions, and the sharing of information by competent authorities as well as by credit and 
financial institutions and other obliged entities. 

Controllers: 

 Digital  euro  accounts  may  be  opened  (‘onboarding’)  and  managed  by  supervised 
intermediaries acting as obliged entities. In such a situation they would be responsible for the 
processing necessary for AML/CFT checks and not the ECB/Eurosystem.360 

Categories of personal data processed: 

Personal  data  processed  for  AML/CFT  purposes,  notably,  customer  onboarding  and 
verification,  differs  based  on  simplified,  standard,  enhanced  customer  due  diligence.361 
Personal data could include: 

  Natural person data: name, photo, address, date of birth, nationality, occupation, tax 

and fiscal residence 

  Legal entity data: which may include personal data (Beneficial Owner identity, source 

of funds). 

The  collection  and  subsequent  processing  of  personal  data  by  obliged  entities  should  be 
limited to what  is  already  necessary for the purpose of complying with  the requirements  of 
the AML/CFT framework. The storage retention period will follow the periods set in Article 
30362, Article 40363 of the AML/CFT framework.  

CDD  processes  for  customer  identification  and  identity  verification  may  take  place  online 
(remotely). Any integration of electronic identity  solutions for AML/CFT  purposes must be 
in  line  with  data  protection  by  design  and  by  default,  in  particular  in  full  respect  of  data 
minimisation  principle.364  Personal  data  processed  through  electronic  identification  means 
and relevant trust services as set out in Regulation (EU) No 910/2014 will respect the storage 

358 Article 43 AMLD5 “The processing of personal data on the basis of this Directive for the purposes of the prevention of money laundering 
and terrorist financing as referred to in Article 1 shall be considered to be a matter of public interest under Regulation (EU) 2016/679 of the 
European Parliament and of the Council.”  
359 AMLD5 EUR-Lex - 32018L0843 - EN - EUR-Lex (europa.eu), and future AMLR EUR-Lex - 32015L0849 - EN - EUR-Lex (europa.eu) 
360 To note however that where personal data becomes available through national registers or through the system of interconnection of 
registers, public authorities in charge of national (and EU) registers may determine the means of processing as the controller. 
361 Articles 10-24 AMLD5, EUR-Lex - 32018L0843 - EN - EUR-Lex (europa.eu)  
362Article 30 AMLD: in the case of customer due diligence, a copy of the documents and information which are necessary to comply with 
the customer due diligence requirements, may be retained for a period of five years after the end of the business relationship with their 
customer or after the date of an occasional transaction. Member States be consider it justified to further retain relevant data for five 
additional years.  
363Article 40 AMLD5, beneficial ownership information ‘shall be available through the national registers and through the system of 
interconnection of registers for at least five years and no more than 10 years after the corporate or other legal entity has been struck off from 
the register.’ 
364 The current AMLD recognises the use of electronic identification solutions to identify and verify a natural person’s identity (Article 
13.1a of AMLD). The proposed AML Regulation aims to facilitate the use of electronic identification in the financial sector, notably by 
harmonized list of CDD attributes for the purposes of electronic identification for standard, simplified and enhanced customer diligence, in 
the form of an RTS on CDD, will be established (AMLR proposal Article 22).  Proposal for a Regulation amending Regulation (EU) No 
910/2014 as regards establishing a framework for a European Digital Identity EUR-Lex - 52021PC0281 - EN - EUR-Lex (europa.eu) 

200 

 
 
 
                                                           
periods set in AML/CFT framework.365 Appropriate safeguards should be in place to govern 
the  use  of  electronic  identity  schemes  in  the  context  of  digital  euro,  in  particular  measures 
against  unauthorised  or  unlawful  processing  of  personal  data  and  against  accidental  loss, 
destruction or damage. 

2.5 

Taxation and combatting tax avoidance  

Purpose of processing: 

A digital euro would be treated as a currency for tax purposes.366 The proper implementation 
of Union and Member State taxation law is important to ensure the functioning of the internal 
market, to ensure fair tax competition, and to combat challenges such as tax avoidance.367 

Controllers: 

The controllers would be supervised intermediaries acting as payment service providers.368 If 
payment  service  providers  manage  digital  euro  transactions,  they  will  need  to  report  under 
taxation rules, including on cross-border payments, as with any other currency.369 

While public authorities (e.g. central banks) do not qualify as taxable persons370, digital euro 
activities provided by intermediaries could be taxed.371 

Categories of personal data processed: 

Personal  data may  be processed  as part of the reporting requirements to  ensure  compliance 
with tax law and combat tax avoidance.  

  Digital  euro  payments  may  be  subject  to  the  reporting  obligation  introduced  by 
Directive  (EU)  284/2020  and  Regulation  284/2020  with  regards  to  requirements  for 
payment providers to fight e-commerce VAT fraud.   

  Digital euro payments may be subject to the reporting obligation specified in Article 
243d  of  the  VAT  Directive.  The  data  to  be  collected  and  transmitted  to  Member 
States  includes  the  name  or  business  name  of  the  payee,  any  VAT  identification 
number or other national  tax number of the payee;  the  IBAN or any other identifier 
which unambiguously identifies the payee, and the address of the payee.372  

2.6   

Managing operational and security ICT risks  

365 Article 40(1)(a) AMLD5 
366 For VAT purposes, the digital euro would in principle be treated as a currency provided that it performs the functions of a currency and it 
is accepted as such by the parties involved in a transaction. The supply of any good and service remunerated by way of digital euro would be 
treated for VAT purposes in the same way as any other supply remunerated by way of existing euro. 
367 This includes both direct taxation and indirect taxation law at both EU and Member State level. 
368 
 Certain data processing operations may see tax authorities of member states fulfil the function as controllers. Where required, such as to 
monitor cross-border payments to fight VAT fraud, the Commission may be a controller. 
369 Directive 283/2020 and Regulation 284/2020 on VAT fraud are applicable to the payment service providers defined in point (a) to (d) of 
Article 1(1) of the PSD2, which provide the payment services set out in point (3) to (6) of the Annex I to the PSD2. These services include 
transfer of funds, money remittance, issuing of payment instrument and acquiring of payment transaction.  
370. Given this, central banks including the ECB are not in scope of Directive 283/2020 and Regulation 284/2020, even though they can be 
payment service providers under the PSD2. Under Article 13 of the VAT Directive (Council Directive 2006/112/EC), public bodies 
governed by public law (such as National Central Banks) cannot be regarded as taxable persons in respect of the activities that they perform, 
even against remuneration, unless their treatment as non-taxable persons would lead to significant distortions of competition 
371 From a VAT perspective, activities related to digital euro should not be treated differently from any activity related to a traditional euro 
in so far as they replicate the same functioning. New or novel activities related to a digital euro will need a case-by-case assessment on the 
basis of the general VAT principles. Financial services are in principle exempt from VAT. Since the exemption from VAT must be 
interpreted strictly, services not having a financial nature, such as mere technical and administrative services, would in principle be taxed. 
372 Article 243d VAT Directive EUR-Lex - 02006L0112-20200101 - EN - EUR-Lex (europa.eu)  

201 

 
 
 
                                                           
Purpose of processing:  

Processing  personal  data  for  purposes  related  to  operational  resilience  is  essential  for  the 
stability of the digital euro and will ensure that supervised intermediaries abide by sound and 
well-managed ICT risk management frameworks. The objective is to ensure a high level of 
security while also positively affecting the freedom of companies to conduct business. 

Controllers: 

The  controllers  would  be  the  supervised  intermediaries  in  charge  of  the  distribution  of  a 
digital euro. Furthermore, the ECB/Eurosystem may need to process personal data to ensure 
the  integrity  of  the  issuance  of  the  digital  euro  (see  Section  2.1),  and  the  security  of  the 
underlying payment infrastructure.  

Categories of personal data processed:  

IP  addresses,  operational  data  (i.e.  data  points  of  unusual  network  traffic  bundles  of  data, 
signs of DDoS activity etc.) could contain personal data. Principle indicators of compromise 
(IoC) could also contain personal data.   

2.7  

Enabling data-driven ancillary services 

Purpose of processing: 

The proposal establishing a digital euro should allow for processing that furthers innovation 
and  meets  the  needs  of  consumers  in  payment  sector,  as  already  outlined  in  existing  and 
proposed EU regulation. This includes existing PSD2 ‘open banking’ provisions, as well as 
data access and sharing and principles of the proposed Data Act, the Data Governance Act, 
and the Digital Markets Act373. Supervised intermediaries could process personal data linked 
to  digital  euro  activity  to  promote  new  financial  products  and  services  for  consumers  and 
firms.  

Controllers: 

In  the  context  of  payment  accounts,  supervised  intermediaries  could  fulfil  the  role  as 
controllers when acting as account information services providers (AISP), Payment Initiation 
Service Providers (PISP) or Account Service Payment Service Providers (ASPSP) as defined 
in Article 3 PSD2. 

373 The revised Payment Services Directive (PSD2) provides third-party service providers’ access rights to payment accounts upon customer 
request. 

202 

 
 
 
 
 
 
                                                           
Categories of personal data processed: 

Types  of  personal  data  processed  could  include  identity  data  (name,  address,  date  of  birth, 
nationality,  occupation,  email  address  and  phone  numbers)  and  payment  account  data  as 
specified  in  Article  67  PSD2.  The  combination  of  which  data  sets  will  be  processed  will 
depend  on  the  offered  service,  subject  to  a  customer’s  agreement.  Data  sharing  would  be 
limited to the specific purpose of processing, as agreed with the data subject. 

Such  data  will  not  be  accessed  or  stored  for  purposes  other  than  performing  the  account 
information  service  explicitly  request  by  the  data  subject  (payment  service  user),  in 
accordance with the GDPR.  

203 

 
 
 
 
Annex 13 - SME Test   

Identification of SMEs affected 

The  digital  euro  will  affect  all  merchants  and  transacting  parties  throughout  the  European 
Union, including SMEs. For some SME merchants there may be small one-off costs due to 
the  requirement  in  the  preferred  option  to  establish  mandatory  acceptance  (see  impacts 
section  below).  Other  SMEs  and  microenterprises  will  be  exempted  from  mandatory 
acceptance  and  will  not  be  directly  affected.  The  creation  of  the  digital  euro  may  however 
induce  a  faster  uptake  of  digital  payments  in  the  European  market  which  could  create 
pressure on exempted parties to enable their customers to use an electronic payment channel.  

Consultation of SME stakeholders  

The  public  consultation  did  not  provide  any  feedback  which  was  specifically  related  to 
SMEs. In general, respondents expect that with the development of new payment solutions, 
accepting  electronic  payments  means  will  become  more  attractive.  It  was  also  pointed  out 
that  the  costs  of  acceptance  infrastructure  and  payment  fees  will  likely  decrease  thus 
benefitting  in  particular  SME  merchants.  Low  costs  for  acceptance  infrastructure  would 
materialise in particular if the digital euro enables payment solutions which can be integrated 
on existing mobile devices, using for example NFC and dynamic QR codes. 

Impacts on SMEs  

The  digital  euro  will  enable  the  use  of  central  bank  money  in  an  electronic  setting.  It  will 
transform the European market for payments by establishing an alternative channel to settle 
payments.  This  is  expected  to  increase  competitive  pressure  in  the  market  in  terms  of  both 
price  and  innovation.  Merchants  throughout  Europe,  including  many  SMEs,  would  benefit 
from this development.  

It is impossible at this stage to estimate these benefits quantitatively, especially for a specific 
subgroup  like  SMEs.  The  digital  euro  is  expected  to  give  rise  to  significant  benefits  for 
merchants but the extent to which they materialise will depend on the technical specifications 
and  the  fees  at  which  payments  in  digital  euro  will  be  offered  in  the  market.  Once  the 
technical  specifications  are set,  it may be possible to  estimate broadly the direct  cost-based 
benefits.  The  introduction  of  the  digital  euro  is  also  expected  to  give  rise  to  market 
improvements  in  terms  of  increased  quality  of  payment  services  as  well  as  innovation  that 
will enhance conditions for transacting parties, including SMEs.  

The requirement for mandatory acceptance may imply small one-off costs for SMEs provided 
they  already accept  an  electronic form of payment.  The extent to  which these costs will be 
incurred  depends  on  the  technical  specifications  to  be  developed  by  the  ECB.  If  new  or 
updated  payment  terminals  are  required  for  the  acceptance  of  the  digital  euro,  costs  are 
expected to range from 60-1000 euros per merchant based on stakeholder input374. If existing 
mobile  devices  can  be  used  instead,  one-off  costs  would  be  significantly  lower  and  edge 
towards zero. There will be some minor costs also for SMEs to get acquainted with handling 

374 See table in Annex 2 IV  

204 

 
 
                                                           
digital euro payments and possible changes to internal systems. In stark contrast to the initial 
introduction of the euro as a common currency, any changes to internal systems required will 
be small as there is no need for any conversion of prices.   

Options to mitigate any negative impacts on SMEs  

The preferred option would stipulate that there is a mandatory acceptance of the digital euro 
for  all  merchants  that  already  accept  an  electronic  means  of  payments.  This  requirement  is 
necessary in order to establish sufficient market penetration and create a widely useable form 
of  payment.  However,  in  order  to  avoid  any  undue  costs  on  microenterprises  the  option 
explicitly exempts merchants that only accept cash. This effectively avoids the need to stem 
possible one-off costs for payment terminals as well as on-going payment processing fees.  

If the digital  euro should enable payments  run on existing mobile devices (e.g. smartphone 
based NFC or dynamic QR codes) it could provide the means for microenterprises to offer an 
electronic payment channel while avoiding the need for investment in a payment terminal.  

205