The Digital Euro Package: from Legal Tender to Payment Services Providers

Abstract

This paper examines the proposals for regulating the digital euro, establishing a connection between its legal standing and physical euro cash, and requiring payment services providers to offer digital euro services regardless of their location. It raises questions about the fundamental implications of treating the digital euro as legal tender. However, labelling the digital euro as a legal tender raises uncertainties about its core nature and purpose. The analysis challenges the notion that the digital euro is merely a digital version of physical cash, emphasising the evolving roles of central bank digital currencies and their legal and policy ramifications. With the digitalisation of the economy in mind, it examines how the involvement of payment services providers in distributing the digital euro could impact individual and economic rights. It underscores the importance of a balanced approach in regulating the digital euro, which should consider security measures, privacy, and data protection while fostering competition. The paper aims to provide policymakers with insights into the design and regulation of the digital euro, underlining the necessity of clarifying its legal standing and reconsidering its classification as legal tender. It stresses the importance of thoroughly examining the conceptual foundations of the digital euro to ensure its successful implementation and regulation.

Keywords: Digital euro, Legal tender, Fraud detection, Interoperability, PSP

JEL Classification: K20, K23