Abstract
ABSTRACT The Eurosystem is mandated to safeguard price stability according to article 127 of the Treaty on the Functioning of the European Union (TFEU). Based on a theoretical and policy-oriented approach, this article sheds light on a second public good with enormous practical relevance both for financial markets and institutions as well as for the general public that the Eurosystem, and ultimately the European Central Bank (ECB), must safeguard according to article 128 TFEU: the availability of ideal monetary objects for the public. While monetary policy constitutes the instrument used to keep prices stable, the availability of ideal monetary objects is ensured through the issuance of ‘cash’ that serves as both money with selected properties and an anchor for other monies of the same currency, including sight deposits at commercial banks. Today, the role of ideal monetary objects is (still) primarily fulfilled by tangible banknotes. As the use of tangible banknotes declines, however, a digital equivalent and complement—a digital euro—becomes increasingly necessary. Accordingly, the article concludes that the ECB is both entitled and obliged de lege lata to issue a digital euro on the basis of article 128 TFEU. It further explains that neither tangible cash nor a digital euro can simultaneously be used as instruments in themselves to maintain price stability.
Highlights
The digital euro is no longer a vague concept of a distant future
While monetary policy constitutes the instrument used to keep prices stable, the availability of ideal monetary objects is ensured through the issuance of ‘cash’ that serves as both money with selected properties and an anchor for other monies of the same currency, including sight deposits at commercial banks
The article concludes that the European Central Bank (ECB) is both entitled and obliged de lege lata to issue a digital euro on the basis of article 128 TFEU
Summary
The digital euro is no longer a vague concept of a distant future. Like other central banks, the European Central Bank (ECB) is actively pursuing the possibility of complementing euro cash with a digital equivalent, a so-called retail central bank digital currency (rCBDC).[1]. To this three-level structure, we add the supporting tasks, which are subordinate in nature They aim to create conditions under which an instrument can achieve an objective in the most effective way, for example, by giving cash certain properties so that it can function optimally as money and anchor, or by structuring the financial market with respect to authorities, market participants, and dissemination media (such as money and infrastructure) in such a way that monetary policy impulses can be effectively propagated. The instrument used to achieve this objective is the issuance of a monetary object that serves both as money with ideal properties and as an anchor for other monies of the same currency (eg deposits) This role is (still) fulfilled by cash today, in particular by tangible banknotes. 40 On the question of technology (including non-DLT-based alternatives) and design (account and token) see Benjamin Geva, Seraina Grünewald and Corinne Zellweger-Gutknecht, ‘The e-banknote as a “banknote”: a monetary law interpreted’ (forthcoming) Oxford Journal of Legal Studies, 2021
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