Opinion of the European Central Bank of 4 March 2024 on the rounding of cash payments (CON/2024/7)

OPINION OF THE EUROPEAN CENTRAL BANK of 04 March 2024 on the rounding of cash payments (CON/2024/7) Introduction and legal basis

On 2 February 2024 the European Central Bank (ECB) received a request from the Estonian Ministry of Finance for an opinion on a draft law amending the Law on the introduction of the euro (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 currency matters and 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 The purpose of the draft law is to introduce the rounding of final amounts payable in cash. Regardless of the quantity of goods and services purchased with a single cash payment, the draft law proposes to round only the total final cash payment, meaning that the prices of the individual items constituting the final amount payable are not rounded. The final amount payable is to be rounded down or up to the closest multiple of five cents. The rounding does not apply if the final amount payable is less than three cents. The rounding rules under the draft law will not apply to payments made via electronic means, such as payment cards. The draft law does not affect the status of one and two cent coins as legal tender: coins in these denominations may continue to be used for payment without restrictions. 1.2 The explanatory memorandum to the draft law explains that the purpose of the draft law is to introduce mandatory rounding rules for one and two cent coins. The national legislator envisages that these rules will lessen the demand for one and two cent coins in the circulation of cash, and as a result lead to (1) reduced costs for the public, and a reduced burden on the environment relating to the minting of new one and two cent coins, which fall out of circulation very quickly;

(2) simplification of the procedure for cash payments; and (3) reduction of the administrative and related costs imposed on market participants that relate to the handling, storage, ordering and transportation of coins of a low value and denomination.

2. General observations

2.1 The draft law is not likely to have a real impact on inflation in Estonia, particularly considering that the rounding of prices is symmetrical and confined to final cash amounts to be paid. 2.2 In accordance with Article 128(2) of the Treaty, the competence to adopt measures to harmonise the denomination and technical specifications of all euro coins intended for circulation to the extent necessary to permit their smooth circulation within the Union is vested in the Council of the European Union, on a proposal from the European Commission and after consulting the European Parliament and the ECB. The legal tender status of euro cent coins within the euro area is laid down in Article 11 of Council Regulation (EC) No 974/98 . In addition, Article 2 of Regulation (EC) No 974/98 provides that the euro, as the currency of the euro area, is divided into one hundred cent. The denomination structure of the euro coins (i.e. 1, 2, 5, 10, 50 euro cent, 1 euro and 2 euro coins) has remained unchanged since the introduction of the euro . However, the use of different denominations of euro coins, as currently devised, should be periodically and carefully examined by the competent institutions against the criteria of cost and public acceptability. In particular, the Commission should conduct an impact assessment on the continued issuance of one and two euro cent coins . In this regard, the Commission has carried out a public consultation on uniform rounding rules for cash payments in euro, with the response period having closed on 11 January 2021. 2.3 With a view to preserving the unity and integrity of the single monetary area, and considering the abovementioned ongoing work of the Commission, the ECB has consistently recommended that any rounding rules are established in a harmonised manner at Union, rather than at national level . Accordingly, and in the light of the Union’s exclusive competence for laying down the measures necessary for the use of the euro as the single currency, any mandatory rounding rules in respect of euro coins would appear to call exclusively for Union rather than national legislation. 2.4 The ECB also considers it important to stress that mandatory rounding legislation must not prevent one and two euro cent coins from being accepted as a means of payment as they are de jure legal tender in the entire euro area. In this respect, Member States’ legislation must not lead to divergent treatment of euro legal tender. In this regard, the ECB understands that the provisions of the draft

law do not discharge individuals and businesses from the obligation to accept one and two euro cent coins even after the draft law introduces mandatory rounding. This means that one and two cent coins will remain universally accepted legal tender in Estonia. The ECB considers it crucial that one and two euro cent coins remain universally accepted legal tender for so long and insofar as they remain legal tender under Union law. 2.5 Finally, the ECB notes that the reduced use of one and two euro cent coins as a result of rounding will reduce resource consumption and be supportive of a more efficient use of cash. This is in line with the goals of the Eurosystem’s Cash 2030 strategy to make the cash cycle as cost efficient as possible and to look at the environmental footprint of cash to identify opportunities to reduce its environmental impact.

This opinion will be published on EUR-Lex.

Done at Frankfurt am Main, 04 March 2024.

[signed]

The President of the ECB

Christine LAGARDE