EUROPEAN CENTRAL BANK
EUROSYSTEM

ECB-RESTRICTED

Yves Mersch
Member of the Executive Board

Prof. dr. J. Swank
De Nederlandsche Bank N.V.
P.O. Box 98
1000 AB Amsterdam
The Netherlands

20 September 2018

No-cash policy of Dutch municipalities

Dear Mr. Swank,

^d It

r '
I would like to thank you for your letter of 17 September 2018 in which you have requested the EGB's view
on the compatibility of a 'no-cash policy' with Union law on the legal tender status of euro banknotes and

coins. As you have rightly appreciated, such a policy would be of great concern for the European Central
Bank (ECB)and the European System of Central Banks from a legal tender perspective, as I will explain in
this letter.

I understand that a number of Dutch municipalities do not accept cash payments for certain services they
provide to citizens. In particular, this applies to the issuance of certain documents, such as passports,
driving licences or excerpts from the Basisregistratie Personen (Personal Records Database (BRP)). 1
furthermore understand that the Vereniging van Nederlandse Gemeenten (Association of Dutch
Municipalities (VNG)) is in the process of preparing advice to its members and forming its opinion on the
desirability of this approach (a 'no-cash policy').

In that regard, it should be noted that any cash payment limitations affecting the legal tender status of the
euro banknotes and coins must comply with Union law. This would also apply to any cash payment
limitations introduced by the Dutch municipalities.

Union law gives euro banknotes and coins the status of legal tenderV Paragraph 2 of Commission

Recommendation 2010/191/EU^ states that the acceptance of cash payments should be the rule, but
4

See Article 128(1) of the Treaty on the Functioning of the European Union and Articles 10 and 11 of Council Regulation
(EC) No 974/98 of 3 May 1998 on the introduction of the euro(OJ L 139, 11.5,98 p. 1).

^ Commission Recommendation 2010/191/EU of 22 March 2010 on the scope and effects of legal tender of euro banknotes
and coins(OJ L 83, 30.3.2010, p. 70).

Address

Postal address

European Central Bank
Sonnemannstrasse 20

European Central Bank
60640 Frankfurt am Main

Tel.:+49 69 1344 0
Fax: +49 69 1344 6000

60314 Frankfurt am Main
Germany

Germany

E-mail: info@ecb.europa.eu
Website: www.ecb.europa.eu

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acknowledges that cash payments may be refused for reasons related to the 'good faith principle', without
this constituting a breach of the legal tender status of cash. Neither Union iaw nor the Commission

Recommendation explicitly addresses whether, nor to what extent, it may be permissibie to introduce a

more general limitation to the obligation to accept cash payments. Therefore, Union law must be interpreted
in order to ascertain the conditions that a limitation on payments in euro notes and coins should fulfil. So

what are the conditions that shouid be fulfilled to comply with the iegal tender status of euro banknotes and
coins when general limitations to the obligation to accept cash payments are introduced?

Council Regulation (EC) 974/98® clarifies that 'limitations on payments in notes and coins, established by
Member States for public reasons, are not incompatible with the status of legal tender of euro banknotes
and coins, provided that other lawful means for the settlement of monetary debts are available'. Such other
lawful means, uniformly acceptable for use within euro area, should be readily accessible to all citizens and
economic agents, resident or non-resident, in the respective Member State.

The ECB acknowledged in the past a number of public reasons that may qualify, in general, as 'public
reasons' justifying the establishment of limits on cash payments: combating money laundering^, limiting the
share of the shadow economy and combating tax evasion®. However, any limitation should not otherwise
affect in principle the legal tender status of euro banknotes®. Following the general principles of Union law,
limitations on cash payments should therefore be effective and proportionate to the objectives pursued and
should not go beyond what is necessary to achieve such objectives^. Any negative impact of the no-cash
policy should therefore be carefully weighed against the anticipated public benefits. When considering
whether a limitation is proportionate, the adverse impact of the limitation in question shouid always be
considered, as well as whether alternative measures could be adopted that would fulfil the relevant
objective of the municipalities and have a less adverse impact.

In this context, it should be considered that the ability to make cash payments remains particularly
important for certain groups in society that, for various legitimate reasons, prefer to make cash payments
rather than use other payment instruments. A cash payment is generally also appreciated as a payment
instrument because it is widely accepted, fast, secure and facilitates control over the payer's spending.
Moreover, it is a means of payment that allows citizens or economic agents in general to instantly settle a
transaction in central bank money and at face value, without the legal possibility to impose a fee for the use

of this means of payment. Additionally, cash payments facilitate the inclusion of the entire population in the
economy by allowing it to settle any kind of financial transaction in this way.

It should be borne in mind that some of the services offered by the municipalities, such as issuance of a
passport, driver's licence and BRP excerpt, are essential services for citizens. The municipalities which are
public institutions act as monopolist in offering such essential services insofar as citizens cannot receive

these services elsewhere. Consequently, the introduction of a no-cash policy would exclude citizens, who

3 Recital 19 of the Council Regulation(EC)974/98 of 3 May 1998 on the introduction of the euro.
4

Paragraph 2.5 of Opinion CON/2017/40 and Paragraph 3.6 of Opinion CON/2017/20.

® Paragraph 2.6 of Opinion CON/2017/17 and Paragraph 2.4 of Opinion CON/2017/18.
® Paragraph 2.5 of Opinion CON/2017/40 and Paragraph 2.4 of Opinion CON/2017/18.

^ Paragraph 3.3 of Opinion CON/2017/20, Paragraph 2.7 of Opinion CON/2017/27, Paragraph 2.5 of Opinion CON/2017/18
and Paragraph 2.6 of Opinion CON/2017/40.

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use cash payments for legitimate reasons or do not have any other option than making a cash payment;
they would not be able to receive these essential public services or would have to request special
permission for using cash. Citizens should not have to justify using cash, certainly not for such essential
services.

Against that background, the EGB considers that the Dutch municipalities' cash payment limitations in
respect of the provision of essential services seem to be disproportionate and as such incompatible with
Union law governing the legal tender status of the euro banknotes and coins.

Yours sincerely.