The European Central Bank’s monetary policy and Central Bank Digital Currency: Can the ECB lawfully introduce a digital euro under its monetary mandate?

This paper discusses the introduction of an account-based general-purpose Central Bank Digital Currency (CBDC) by the European Central Bank (ECB) that is directly accessible to consumers through national central banks (NCB). This paper finds that it is not possible to introduce such a system under the ECB’s monetary mandate. The ECB therefore would have to introduce this system through its economic mandate. This paper discusses whether the ECB can introduce a digital euro under the current legal framework. In doing so, this paper will provide a significant discussion on the legal interpretation of the secondary objectives of the ECB. To do so this paper first discusses the literature on the secondary objectives in section 2. It then continues by discussing in section 3 whether there is a legal foundation for the ECB to introduce a general-purpose digital euro. Section 4 will continue by assessing the legal framework of the secondary objectives of the ECB. This section will consider both the aim of the objectives and the limitation of ‘efficient allocation of resources’. It is concluded that the current legislation does not provide the ECB with the competence to issue a directly accessible digital euro, new legislation would have to be drafted for the ECB to introduce a CBDC system with direct consumer access. Even with this new legal foundation, the ECB would have to comply with its economic mandate. When introducing a digital euro directly accessible through NCBs the ECB is competing with commercial banks. This competition should be considered unfair based upon the ECB’s exclusive power to issue legal tender and the public status of NCBs. Since the issue of unbanked in the EU is limited and decreasing, there is not enough reason to consider offering a bank account as a Service of General Economic Interest. The introduction of directly accessible general purpose CBDC would therefore be unlawful.