Digital Euro Association Blog

The Issuance of the Digital Euro: A Synthesis of the Institutional Aspects

The EU law is a fundamental instrument for the creation of a Central Bank Digital Currency (CBDC) that could serve 20 countries. As the monetary sector for Eurozone countries is an exclusive competence of the EU under Article 3 (1) TFEU, the process of concluding this project will be solely conducted at the EU level, involving both the European Central Bank (ECB) and the National Competent Authorities (NCAs) in the member states. The EU law shall identify both the tools and the processes required for the issuance of a digital euro, while assessing whether the current legal framework permits the realisation of this ECB project.Among the different legal bases that have been identified in order to justify the issuance of a CBDC, there is a proposal which is particularly compelling. In line with the definition provided by the ECB, a digital euro is conceived as a complement to cash and, therefore, as an instrument equivalent to a banknote. An expedient legal basis for its issuance would derive from a combination of Article 128 TFEU with the first paragraph of Article 16 of the ESCB Statute. Specifically, the first paragraph of Article 128 assigns to the ECB the exclusive right to issue euro banknotes and recognises both the ECB and to NCBs the possibility to do so, then it clearly states that the said banknotes are the only one to enjoy the legal tender status across the Union (naturally, this is limited to the Eurozone); then, Article 16 (1) recalls the contents of the Article 128 (1) and assigns the Governing Council the exclusive right to authorise the issue of euro banknotes within the Union. In this case, equating a digital euro to banknotes would give the Eurosystem an ample margin of discretion for the issuance of a digital euro with the status of legal tender, without a modifying intervention on the text of the Treaties, as a digital euro would be considered as a component of the Eurozone monetary base.

In light of the current scenario, an Institutional reform shall provide a solid and concrete starting point for the creation of a digital euro. Basing such an important and wide project solely on interpretative criteria may put at risk its realisation at any stage of existence, and allow for external and further interests to interfere with it. In addition, part of the interpretative logic path shows weakness. Even though a digital euro would be a representation of value, like banknotes, something digital is, by definition, different from cash, which is concrete and tangible. A digital euro would likely have different issuance modalities and a different circulation. Its set of uses – namely the programmability of the possible payments and an eventual combination with smart contracts – would mark a significant turnover from physical cash. Merely equating a CBDC to banknotes would therefore be a forcing, easy to refute, while a revision procedure of the EU Institutional Treaties might be envisaged[1].

Nevertheless, it is important to remember that reforming the Treaties is always a complex mechanism, that implies a long-lasting involvement of different Institutions[2]. On 9 June 2022, the said procedure was begun by the European Parliament, which adopted a resolution calling on the European Council to agree to start the process to revise the EU Treaties[3]. This could be seen as a great opportunity to extend the revision to the monetary sector, as the end of the investigation phase – by which the Eurosystem will decide whether to carry on the digital euro project – is foreseen in October 2023. After considering possible interventions for EU primary law, it is necessary to determine whether a secondary law act could be useful for regulating the issuance, circulation modalities and features of a digital euro[4].

At this stage, it is clear that a digital euro would present unprecedented characteristics, which require a specific and detailed regulation. A legislative intervention would go beyond the Institutional Treaties, and therefore the so-called Primary law, to reach a more detailed discipline, to counterbalance the fact that the issuance of a digital euro will likely differ from physical cash.

A debated question within the legal sphere regards the recognition of a legal tender status to the digital euro. In this case, whether a debtor offered a certain amount of digital euro units to pay a pecuniary obligation, his creditor would not be allowed to deny the said amount.     The simplicity of the usage of a digital euro and its inclusive access, in combination with the legal tender status, would have a positive impact on pecuniary obligations, helping and fastening their extinction and therefore guaranteeing a better fulfilment of the obligation itself. It could be possible to appreciate benefits for contractual activity in general, especially for transnational one, as the efficiency determined by digital euro transfers may encourage the conclusion of the said contracts.



[1] An eventual intervention would regard the contents of Article 128 (1) TFEU, enlarging the exclusive right to issue banknotes to CBDCs and also providing them legal tender status.

[2] Specifically, a reform on this front would regard the Title VIII (Chapter III, Section II) of the TFEU and, therefore, it would require an ordinary revision procedure under Article 48 (2-5) TEU.

[3] To check the list of the proposed amendments, see Press Release, Parliament activates process to change EU Treaties, on, 9 June 2022.

[4] Please see Article 133 TFEU, which allows the EU Parliament and Council to adopt the necessary measures for the use of the euro as a single currency, after consultation of the ECB and without prejudice to its powers.


About the authors

Ludovica Maria Chiapuzzi is a Law graduate and a young professional who operates within the environmental finance. In fall 2022, she graduated from University o Milan with a dissertation on the realisation of the ECB project on a digital euro, from a juridical and economic perspective. She cultivates her interest in CBDCs and private digital money through active participation in the Digital Euro Association (DEA), for which she is currently writing a series of educational articles.

Meglena Grueva is a Senior Manager within Mazars financial services practice in Germany. She has significant knowledge and experience in prudential regulation of the EU banking sector. In the past years, Meglena has developed her expertise in digital assets and blockchain regulation and is presently pursuing a Master of Science in this field at Frankfurt School of Finance and Management. Meglena is part of Mazars Global Financial Services Regulatory Hub, which deals with banking regulatory issues. She follows regulatory developments in the EU, and her present focus is on the Digital finance package for Europe. Prior to joining Mazars, she worked at the European Central Bank, was in a tax advisory firm in New York, USA, and was an investment analyst at a private family office practice in Chicago, where she covered global capital markets.

No Comments Yet

Let us know what you think