The Digital Euro as Legal Requirement

The Digital Euro is a legal obligation, according to an article by three law professors in the Journal of Financial Regulation.

In “Digital Euro, Monetary Objects, and Price Stability: A Legal Analysis,” Corinne Zellweger-Gutknecht, Benjamin Geva, and Seraina Neva Grunewald argue that the European Central Bank is “both entitled and obliged de lege lata to issue a digital euro on the basis of article 128” of the Treaty on the Functioning of the European Union (TFEU).

The writers base this claim on article 128’s directive that the ECB must safeguard “the availability of ideal monetary objects for the public.” Also, these monetary objects are at the basis of monetary policy focused on price stability that is required in article 127 TFEU. These ideal monetary objects are currently Euro banknotes that not only serve as money but also as “an anchor” for other forms of the Euro.

Consequently, the ECB cannot allow a displacement of the official Euro through the overall decline of cash usage or through the rise of private payment mechanisms. This would violate articles 127 and 128 of the TFEU. The ECB must, therefore, issue a digital equivalent of the physical Euro as “a digital equivalent and complement.”

This is the strongest case that I have seen for the Digital Euro. It echoes concerns that have arisen elsewhere in Europe over the past two decades about the disappearance of cash or the role of central bank money in payments in general and the need for a central bank to provide official money as a public good. But, here, it is written clearly in the law.