Merchants within the euro area could be obliged to accept a digital euro if it is deemed to be legal tender, according to a paper set to be put before finance ministers later Monday and seen by CoinDesk.
Giving the central bank digital currency (CBDC) the same status as banknotes and coins would mean payments legally discharge obligations to pay, and with mandatory acceptance at full face value, the paper said.
Legal tender status “would imply a legal obligation for (certain) payees to accept payments in digital euro … thereby increasing its network effects, and potentially affecting its distribution,” said the document, drafted by the secretariat of the Eurogroup, which brings together finance ministers from the 20-nation currency area, ahead of a monthly meeting
The paper also asks ministers "whether exemptions should be considered to ensure proportional application ... balancing the principles of contractual freedom and mandatory acceptance."
At a previous discussion in January, ministers said the digital euro shouldn’t be programmable – as giving the ability to limit how a given payment can be used by the recipient would impair money’s fungible status.
The European Central Bank is set to formally decide whether to issue its currency in digital format in the fall, and officials are working on technical details such as which potential uses to prioritize.
EU national governments will be involved in agreeing any legislation needed to underpin the CBDC. Last week the European Commission's Mairead McGuinness confirmed that a bill due shortly will, alongside legal tender status, examine anti-money laundering rules, and compensation for those distributing the currency.
Read more: Online Transactions, Peer-to-Peer Payments Should Be Priorities With Digital Euro, ECB Says
