Digital Euro and ECB Powers

Abstract

The use of cash in the euro area is declining. Accordingly, the European Central Bank is exploring options for the design of a digital euro as a form of central bank money available to the public. This article addresses the key question of whether the Eurosystem is empowered to issue a digital euro and, if so, in what form. Based on a historical, teleological, and systematic interpretation, it argues that Article 128(1) TFEU serves as both a source of competence for the Eurosystem to issue a digital euro and a limitation to that competence. The Eurosystem’s powers are necessarily exclusive and must prevail over the remaining competence of Member States to issue tangible coins on the basis of Article 128(2) TFEU. The article also addresses whether a digital euro would and should possess legal tender status, referring to recent case law in the field.

Keywords: digital euro, retail central bank digital currency, rCBDC, European Central Bank, ECB, Eurosystem, banknotes, legal tender

JEL Classification: E42, E58, K23