Opinion of the European Central Bank of 23 October 2023 on the obligation for enterprises to accept payment in cash from consumers (CON/2023/33)

OPINION OF THE EUROPEAN CENTRAL BANK of 23 October 2023 on the obligation for enterprises to accept payment in cash from consumers (CON/2023/33) Introduction and legal basis

On 26 July 2023 the European Central Bank (ECB) received a request from the Belgian Chamber of Representatives for an opinion on a draft law amending the Belgian Code of Economic Law to ensure the obligation for enterprises to accept payment in cash from consumers (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the first and second indents of Article 2(1) of Council Decision 98/415/EC , as the draft law relates to (1) currency matters and (2) means of payment. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

1. Purpose of the draft law

1.1 According to the explanatory memorandum of the draft law, the key objectives of the draft law are (a) to clarify the obligation, which already exists under Union law, for enterprises with a physical location to accept cash payments from consumers by including it in the Code of Economic Law and (b) to provide for a fine in case of breach of such obligation. 1.2 According to the explanatory memorandum, payments in cash are now being refused by some businesses in Belgium. However, according to surveys, including an ECB survey on the payment attitudes of consumers in the euro area, a majority of Belgians believe that it is important to be able to pay in cash. Although in Belgium the frequency with which cash is used as a means of payment has fallen slightly in recent years, around 45% of consumers’ payments for their purchases at points of sale are in cash. 1.3 The explanatory memorandum notes that, while electronic payments are increasingly accepted and are to be encouraged, banknotes and coins denominated in euro are still the only instrument classified as legal tender under Union law. Extensive reference is made in this respect to the judgment of the Court of Justice of the European Union in Joined Cases C-422-19 and C-423/19 .

1 Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank by national authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42).

2 Code de droit économique du 28 février 2013/Wetboek van economisch recht van 28 februari 2013, tel que modifié/zoals nader gewijzigd, Moniteur belge/Belgisch Staatsblad, 29.03.2013, p. 19975.

3 See judgment of the Court of Justice of 26 January 2021, Hessischer Rundfunk, C-422/19 and C-423/19, EU:C:2021:63. 1.4 The explanatory memorandum states that arguments against the use of cash should be subjected to critical examination, and the alternatives proposed, primarily electronic payments, are not necessarily better. While cash is expensive for banks, other methods of payment involve onerous charges for customers and businesses. According to the explanatory memorandum, although people say cash creates insecurity, the number of robberies is decreasing, and this insecurity has largely shifted to digital payments. The fact that some people use cash for nefarious purposes, such as tax evasion, money laundering and the financing of criminal activities, does not mean that the entire population should be prevented from using cash. 1.5 The explanatory memorandum underlines that cash continues to be an essential means of payment to meet the daily needs of certain groups, such as the elderly, immigrants, people with disabilities, socially vulnerable citizens and the marginalised. In this context, the explanatory memorandum references an ECB opinion which welcomes future innovations and developments in the field of electronic payment instruments and their continued spread in society, but states that this cannot be to the detriment of cash payments in the Member States that have adopted the euro as their currency . 1.6 Although electronic payments are becoming increasingly accepted and should be encouraged, euro banknotes and coins are still the only banknotes and coins with legal tender status. In this context, the explanatory memorandum references a European Commission communication of 24 September 2020 on a Retail Payments Strategy for the EU stating that Member States must, while encouraging the emergence of digital means of payment to widen consumer choice, continue to preserve the legal tender status of euro cash. 1.7 The draft law introduces two new provisions in the Code of Economic Law. The first one provides that, without prejudice to the provisions of Book III of the Law of 18 September 2017 on the prevention of money laundering and terrorist financing and on the restriction of the use of cash , which limit cash payments to a maximum of EUR 3 000, when a payment in euro takes place in the simultaneous physical presence of a consumer and an enterprise, the enterprise must accept payment in cash from the consumer . The second one provides for the imposition of a criminal fine ranging from a minimum of EUR 26 to a maximum of EUR 10 000 (to be multiplied by the additional decimals) or 4% of the total annual turnover for the last financial year, whichever is higher, in case of breach of this obligation .

4 See Opinion CON/2021/38. All ECB Opinions are available on EUR-Lex.

5 See COM (2020) 592 final.

6 Loi du 18 septembre 2017 relative à la prévention du blanchiment de capitaux et du financement du terrorisme et à la limitation de l'utilisation des espèces/ Wet van 18 september 2017 tot voorkoming van het witwassen van geld en de financiering van terrorisme en tot beperking van het gebruik van contanten, telle que modifiée/zoals nader gewijzigd, Moniteur Belge/Belgisch Staatsblad, 06.10.2017, p. 90839.

7 See Article 2 of the draft law introducing a new Article VI.7/5 in the Code of Economic Law.

8 See Article 3 of the draft law introducing a new section 1°/4 into Article XV.83 of the Code of Economic Law.

2. General observations

2.1 Role and importance of cash payments in society 2.1.1 Although electronic payment instruments are increasingly used for retail payments in a number of Member States, cash continues to play an important role in society and is still widely used throughout the entire population. The ability to pay in cash remains particularly important for those who, for various legitimate reasons, prefer to use physical money rather than other payment instruments, or do not have access to the banking system and electronic means of payments. These groups include not only elderly people but also some citizens with disabilities, immigrants, socially vulnerable citizens, minors and others with limited or no access to digital payment services . Cash is generally also useful as a payment instrument because it is widely accepted, fast and facilitates control over the payer’s spending. Moreover, it is currently the only payment instrument that allows citizens to settle a payment transaction in central bank money, which is also settled instantly, while, importantly, ensuring privacy. Furthermore, cash could play an important role in the event of a disturbance in the 10 11 payment system and it is robust against cyber-crime . 2.1.2 Against this background, the ECB welcomes the fact that the draft law aims to preserve citizens' right to pay in cash. 2.2 Status of euro banknotes and coins as legal tender 2.2.1 The ECB has the exclusive right to authorise the issue of euro banknotes within the Union, and the euro banknotes issued by the ECB and the national central banks of the euro area are the only banknotes with legal tender status within the euro area . 2.2.2 The concept of ‘legal tender’ as a means of payment denominated in a currency unit has been considered by the Court of Justice of the European Union. In particular, the Court has clarified that the concept of ‘legal tender’ signifies that this specific 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. In clarifying the concept of ‘legal tender’ under Union law, the Court has taken into consideration Commission Recommendation 2010/191/EU , which provides useful guidance for the interpretation of the relevant provisions of Union law. Point 1 of Recommendation 2010/191/EU states that, where a payment obligation exists, the legal tender of euro banknotes and coins should imply (a) mandatory acceptance of those banknotes and coins; (b) their acceptance at full face value; and (c) their power to discharge from payment obligations. According to the Court, this shows that the concept of ‘legal tender’ encompasses, inter alia, an obligation in principle to accept banknotes and coins denominated in euro for payment purposes .

9 See paragraph 2.4 of Opinion CON/2017/8; paragraph 2.1 of Opinion CON/2019/41; paragraph 9.2.1 of Opinion CON/2020/13; paragraph 2.3 of Opinion CON/2020/21; paragraph 7.2.1 of Opinion CON/2021/9, paragraph 2.1 of CON/2021/18 and paragraph 2.1 of Opinion CON/2023/13.

10 See paragraph 2.1 of Opinion CON/2019/41, paragraph 9.2.1 of Opinion CON/2020/13 and paragraph 2.3 of Opinion CON/2021/18.

11 See paragraph 2.2 of Opinion CON/2021/32.

12 First and third sentences of Article 128(1) of the Treaty and first and third sentence of Article 16 of the Statute of the European System of Central Banks and of the European Central Bank.

13 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).

14 See judgment of the Court of Justice of 26 January 2021, Hessischer Rundfunk, joint cases C-422/19 and C-423/19, EU:C:2021:63, paragraphs 46 to 49. 2.2.3 The Court has clarified that the concept of ‘legal tender’ is a concept of Union law that must be given an autonomous and uniform interpretation throughout the European Union . Insofar as it allows the Union legislature to lay down the measures necessary for the use of the euro as the single currency, the Court clarified that Article 133 of the Treaty empowers the Union legislature alone to specify the legal rules governing the status of legal tender accorded to banknotes and coins denominated in euro, insofar as that is necessary for the use of the euro as the single currency. In this respect, the ECB notes that, on 28 June 2023, the Commission published a proposal for a Regulation on the legal tender of euro banknotes and coins (the ‘proposed regulation on the legal tender of euro banknotes and coins’), which would establish rules on the legal tender of euro banknotes and coins in binding Union secondary law . The explanatory memorandum of the proposed regulation on the legal tender of euro banknotes and coins states that discussions within the Euro Legal Tender Expert Group (ELTEG) confirmed the existence of uncertainty and important differences regarding the practical application of the concept of legal tender across the euro area . These differences would justify establishing rules on the legal tender of euro cash in a regulation adopted under Article 133 of the Treaty. 2.2.4 The Union legislature's exclusive competence precludes any competence on the part of the Member States in the matter, unless they have been empowered by the Union to do so or for the implementation of Union acts . 2.2.5 As acknowledged in the explanatory memorandum of the draft law, the first provision of the draft law clarifying the obligation for enterprises with a physical location to accept cash payments from consumers reiterates Union law. The ECB understands that the Belgian legislator does not intend to regulate the procedures for settling pecuniary obligations ; the Belgian legislator's intention is rather to facilitate the application in Belgium of the obligation in principle to accept banknotes and coins denominated in euro for payment purposes, in line with the case-law of the Court of Justice of the European Union . In principle, however, such reiteration should be avoided. In this context, the ECB recalls that the reproduction in a national provision of a Union obligation that is directly applicable in the legal order of the Member State may create uncertainty both as to the legal nature

15 See judgment of the Court of Justice of 26 January 2021, Hessischer Rundfunk, joint cases C-422/19 and C-423/19, EU:C:2021:63, paragraph 45.

16 Proposal of the European Commission of 28 June 2023 for a regulation of the European Parliament and of the Council on the legal tender of euro banknotes and coins,(COM(2023) 364 final).

17 See section 3, page 4 of the Explanatory memorandum of the proposed regulation on the legal tender of euro banknotes and coins, and the Final report of the Euro Legal Tender Expert Group (ELTEG) of 6 July 2022.

18 See judgment of the Court of Justice of 26 January 2021, Hessischer Rundfunk, joint cases C-422/19 and C-423/19, EU:C:2021:63, paragraphs 50 to 52.

19 See Article 2 of the draft law introducing a new Article VI.7/5 in the Code of Economic Law.

20 In the Hessischer Rundfunk case (see judgment of the Court of Justice of 26 January 2021, Hessischer Rundfunk, joint cases C-422/19 and C-423/19, EU:C:2021:63), the Court of Justice held that the status as legal tender calls only for acceptance in principle of banknotes denominated in euro as a means of payment, not for absolute acceptance (paragraph 55). The Court of Justice also held that the Union’s exclusive competence in matters of monetary policy is without prejudice to the competence of the Member States whose currency is the euro, in the exercise of their own powers, to regulate the procedures for settling pecuniary obligations, whether under public law or private law, provided, in particular, that the legislation does not affect the principle that, as a general rule, it must be possible to discharge a payment obligation in cash (paragraph 56). However, Member States may introduce stricter rules in the exercise of their own powers.

21 See judgment of the Court of Justice of 26 January 2021, Hessischer Rundfunk, joint cases C-422/19 and C-423/19, EU:C:2021:63, paragraph 49. of the applicable obligation and as to the date of its entry into force. This would not align with the uniform application and interpretation of Union law throughout the Union . 2.2.6 The ECB recalls that the incorporation of some elements of obligations of Union law into national law is warranted only in exceptional circumstances for the sake of coherence and in order to make them comprehensible to the persons to whom they apply . If such exceptional circumstances do exist, the reproduction of elements of directly applicable obligations of Union law should be done precisely, by incorporation or reference , and only to the extent warranted by the exceptional circumstances. However, such exceptional circumstances do not exist if the directly applicable obligations of Union law are sufficiently coherent and comprehensive, making it unnecessary to repeat or reflect them in national law . The ECB understands that the reiteration in national law of the obligation in principle under Union law to accept payments in euro cash aims at making such obligation more explicit to Belgian enterprises and consumers and at providing for a fine under national law for any breach of this obligation. 2.2.7 The ECB considers that the reproduction of the obligation of mandatory acceptance of euro cash is warranted as it provides a connection to the introduction of the fine for breach of the obligation. To the extent that the first provision of the draft law necessarily reproduces Union law for the abovementioned reasons, it should do so in an explicit manner. The ECB therefore suggests that the draft law clarifies in its text, in addition to the explanatory memorandum, that its first provision is ‘in accordance with’ Union law, including most importantly Article 128(1) of the Treaty. Such a clarification would also highlight that the first provision of the draft law is subject to the exceptions to mandatory acceptance established in Union monetary law.

3. Specific observation

3.1 The ECB welcomes the second provision of the draft law, which proposes to introduce a pecuniary sanction for breach of the obligation for enterprises with a physical location to accept cash payments from consumers. Such sanction will facilitate enforcement of this obligation of Union law. 3.2 The introduction of a pecuniary sanction to reinforce the legal tender status of banknotes and coins in Belgium is consistent with the proposed regulation on the legal tender of euro banknotes and coins, which envisages that Member States lay down the rules on penalties, including financial penalties and non-criminal fines, applicable to infringements of the proposed regulation . As noted in the explanatory memorandum to the proposed regulation, these provisions would ensure that the

22 See Judgment of the Court of Justice of 7 February 1973, Commission v Italy, C-39/72, EU:C:1973:13, paragraphs 16 and 17; Judgment of the Court of Justice of 10 October 1973, Variola, C-34/73,:EU:C:1973:101, paragraphs 9 to 11; and Judgment of the Court of Justice of 2 February 1977, Amsterdam Bulb, C-50/76,:EU:C:1977:13, paragraphs 5 to 8. See also paragraph 12 of Opinion CON/2005/21, paragraph 2.1 of Opinion CON/2006/10, paragraph 2.4 of Opinion CON/2006/29, paragraph 2.1 of Opinion CON/2007/1, paragraph 2.2 of Opinion CON/2007/43 and paragraph 2.3 of Opinion CON/2022/15.

23 See paragraph 12 of Opinion CON/2005/21 with reference to Judgment of the Court of Justice of 28 March 1985, Commission v Italian Republic, C-272/83, EU:C:1985:147 and paragraph 2.4 of CON/2022/15. See a contrario also paragraph 2.2 of CON/2006/10.

24 See paragraph 2.2 (footnote 6) of Opinion CON/2007/43 and paragraph 2.4 of Opinion CON/2022/15.

25 See paragraph 13 of Opinion CON/2005/21, paragraphs 2.2 and 3.2 of Opinion CON/2006/10 and paragraph 2.4. of Opinion CON/2022/15.

26 See Article 12 of the proposed regulation on the legal tender of euro banknotes and coins. proposed regulation’s provisions are enforced, while allowing Member States a level of flexibility on the nature of the penalties applicable . This opinion will be published on EUR-Lex. Done at Frankfurt am Main, 23 October 2023. [signed] The President of the ECB Christine LAGARDE

27 See Explanatory memorandum of the proposed regulation on the legal tender of euro banknotes and coins. ‘Penalties (Article 12)’, p. 9.