Opinion of the European Central Bank of 6 December 2024 on the obligation to accept cash payments (CON/2024/39)

OPINION OF THE EUROPEAN CENTRAL BANK of 6 December 2024 on the obligation to accept cash payments (CON/2024/39) Introduction and legal basis

On 21 October 2024 the European Central Bank (ECB) received a request from the Dutch Minister of Finance for an opinion on a draft amendment (hereinafter the ‘draft amendment’) to a legislative proposal regarding the law on an anti-money laundering action plan containing limitations to cash payments (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 Article 2(1), second indent, of Council Decision 98/415/EC , as the draft amendment relates to means of payment. In accordance with Article 17.5, first sentence, of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

1. Purpose of the draft amendment

1.1 The draft law prohibits natural or legal persons trading in goods from receiving or making a payment in cash in an amount equal to or greater than EUR 3 000. The draft amendment provides that if a debtor is a natural person who is acting for purposes which are outside his or her business, trade or profession (hereinafter a ‘consumer’), and the respective creditor is not a natural person acting for purposes outside his or her business, trade or profession, the creditor must accept the commitment to pay a sum of money in cash up to the amount of below EUR 3 000 . 1.2 The explanatory memorandum accompanying the draft amendment (hereinafter the ‘explanatory memorandum’) argues that, although cash is legal tender, the law does not currently require individual organisations to accept it. They may refuse cash (the explanatory memorandum continues) and in fact more and more places, for instance pharmacies, cinemas and parking garages, are doing so. The explanatory memorandum explains that the rationale behind the draft amendment is to respond to the declining use of cash in Dutch society. Several vulnerable groups in society, including refugees and senior citizens, still use cash on a regular basis, sometimes out of necessity. It is also stated that 2.6 million Dutch people aged 18 and older struggle with the digital payment world. Furthermore, according to the explanatory memorandum, broad acceptance of cash is necessary to create a resilient infrastructure for payments that can withstand events such as disruptions to digital payment infrastructures. It is argued that when such disruptions occur, people divert to alternatives

but that not everyone can quickly move to other regions not affected by the disruption or postpone certain purchases for a longer period of time. 1.3 The draft amendment embeds the obligation to accept cash payments in Book 6 of the Dutch Civil Code, which covers contract law. 1.4 The draft amendment provides that the Dutch legislator may lay down exceptions to the obligation to accept cash payments via an order in council if this is necessary due to reasons of safety or the specific nature of the relevant activities . The explanatory memorandum gives as a specific example unmanned petrol stations, where it may be undesirable, on grounds both of feasibility and of safety, to impose an obligation to accept cash to fulfil payment obligations.

2. General observations

2.1 The ECB has previously adopted an opinion on the draft law, of which the draft amendment forms part . 2.2 The ECB understands that the draft amendment effectively establishes that professional parties, regardless of whether they are publicly or privately owned, must accept cash for payment from consumers to fulfil contractual payment obligations of a value below EUR 3 000. The draft amendment does not impose any obligations in relation to the fulfilment of contractual pecuniary obligations on consumers. Hence, the draft amendment covers what are hereinafter referred to as business-to-consumer transactions. 2.3 The obligation to accept cash included in the draft amendment does not apply to payments equal to or greater than EUR 3 000. This is due to the fact that the draft law also introduces a general cash restriction for payments equal to or greater than EUR 3 000 based on anti-money laundering considerations. 2.4 The ECB understands that under Dutch law parties are in principle free to deviate from Book 6 of the Dutch Civil Code in the exercise of their freedom of contract, unless a mandatory rule set out in Book 6 of the Dutch Civil Code applies. Since the draft amendment only gives the option to deviate from the obligation to accept cash payments on the basis of an order in council, the ECB understands that the obligation embedded in the draft amendment is such a mandatory rule and cannot be overridden by way of a contractual agreement. 2.5 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 for payments rather than other payment instruments, or do not have access to the banking system and electronic means of payment. These groups include not only elderly people but also people with disabilities, immigrants, socially

vulnerable people, 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 everyone 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 6 7 disturbance in the payment system and it is robust against cyber-crime . Cash also has an important function as a store of value. The availability and accessibility of cash and its fallback function in case of disruptions to electronic payment systems contribute to trust in the financial system, which is important for the smooth functioning of monetary policy . 2.6 The ECB is, thus, fully committed to ensuring that euro cash remains accepted in payments throughout the euro area, in line with the Eurosystem’s cash strategy . Against this backdrop, the ECB welcomes the draft amendment, which will clarify and strengthen the obligation to accept cash as a means of payment in business-to-consumer transactions in the Netherlands. 2.7 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 . The legal tender status of euro coins is provided for in secondary Union law . 2.8 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 of Justice 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 of Justice took 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 of Justice, 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 . 2.9 The Court of Justice 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 Union . It has also established 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. Furthermore, 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 . In this respect, the ECB notes that, on 28 June 2023, the Commission published a proposal for a Regulation of the European Parliament and of the Council on the legal tender of euro banknotes and coins (hereinafter the ‘proposed regulation on the legal tender of euro cash’), which will establish rules on the legal tender of euro banknotes and coins in binding Union secondary law The explanatory memorandum to the proposed regulation on the legal tender of euro cash states that discussions within the Euro Legal Tender Expert Group (ELTEG) confirmed the existence of legal uncertainty regarding the legal tender of euro cash and differing application of its principles in 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.

3. Specific observations

3.1 The ECB has three specific observations on the obligation to accept cash included in the draft amendment. First, the ECB recalls that the Court of Justice has recognised that the legal tender status of euro banknotes and coins, as enshrined in primary and secondary Union law, respectively , entails a fundamental obligation, in principle, to accept those banknotes and coins . This obligation guarantees, as the other side of the same coin, that every debtor has the possibility, as a general rule, to discharge a payment obligation in euro cash. Thus, the ECB considers the sentence from the explanatory memorandum that states that, although cash is legal tender, the law does not currently require individual organisations to accept it, as incorrect. The obligation to accept cash embedded in the draft amendment will clarify and strengthen the mandatory acceptance of cash, which is a key

element of the legal tender status of euro banknotes and coins enshrined in Union law, in the context of business-to-consumer transactions. It will not create ex novo an obligation to accept cash. 3.2 Second, it must be considered whether the obligation to accept cash included in the draft amendment establishes legal rules governing the status of legal tender of euro banknotes and coins, which an area of exclusive competence of the Union under Article 133 of the Treaty, or whether it is a measure taken in the exercise of a competence of the Member States. 3.3 In this respect the ECB notes that the Court of Justice has held that the status of banknotes denominated in euro as legal tender calls only for acceptance in principle of such banknotes as a means of payment, not for absolute acceptance . The Court of Justice 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. This also includes that Member States may introduce stricter rules, which will strengthen the mandatory acceptance of euro cash in their territory, in the exercise of their own powers, such as the organisation of their public administration or in the field of consumer protection. The Court of Justice has also held that one must assess the objective and content of a national law measure that provides for an obligation to accept euro cash to determine whether that measure has been adopted within the framework of the Member States’ own competences . 3.4 The draft amendment’s obligation to accept cash is limited to business-to-consumer transactions. It does not extend to cases in which the debtor of the pecuniary debt is not a consumer (e.g. businessto-business transactions) or where both the creditor and the debtor are consumers (i.e. consumerto-consumer transactions). According to the explanatory memorandum, the obligation for professional parties to accept cash from consumers will protect people who struggle with the digital payment world in general, and vulnerable groups in society in particular, from further decline in levels of cash acceptance by individual organisations such as pharmacies and parking garages. The explanatory memorandum also explains that cash acceptance provides citizens with a valuable alternative in the event of disruptions to digital payment infrastructures because they do not then have to move to other regions not affected by the disruption or postpone certain purchases for a longer period of time when such disruptions occur. Furthermore, the draft amendment embeds the obligation to accept cash payments in title 1, chapter 11 of Book 6 of the Dutch Civil Code, which covers Dutch contract law. Book 6 of the Dutch Civil Code includes several provisions intended to protect consumers when entering into contracts with professional parties. For instance, Articles 235 and 236 in title 5, chapter 2B of Book 6 of the Dutch Civil Code contain a list of contractual terms which are deemed or presumed to be unreasonable for consumers. The ECB therefore understands that the draft amendment’s obligation to accept cash is intended as a national measure which regulates the procedures for settling pecuniary obligations in the exercise of national powers,

particularly in the field of consumer protection. It does not seem to establish legal rules governing the status of legal tender of euro banknotes and coins. 3.5 Third, the ECB notes that the obligation to accept cash embedded in the draft law may contribute to ensuring that consumers purchasing goods or services in the Netherlands are not denied the possibility to pay in cash. Yet it will not resolve the legal uncertainty regarding the concept of legal tender of euro banknotes and coins at Union level. In this respect, the ECB stresses that it strongly supports the establishment of rules on the legal tender status of euro banknotes and coins throughout the euro area in secondary Union law. Only such rules can promote the necessary legal certainty regarding the concept of legal tender in Union law and ensure that this concept is given an autonomous and uniform interpretation throughout the Union .

This opinion will be published on EUR-Lex.

Done at Frankfurt am Main, 6 December 2024.

[signed]

The President of the ECB

Christine LAGARDE