1. The Legislative Package - What is Proposed

28 June 2023, European Commission published two Regulations:

COM(2023) 369 - Regulation on establishment of Digital Euro

• Digital Euro = direct liability of ECB, legal tender in euro area
• Mandatory acceptance by payees, at full face value, with power to discharge payment obligations - Art 7
• Exceptions: microenterprises that don't accept any digital payment, right to refuse in good faith, force majeure - Art 9
• Holding limits: 0 - 4,000 EUR per citizen set by ECB, to protect bank deposits. Legal persons may be prohibited from holding per Parliament mandate 2025
• Privacy: online transactions low privacy, offline transactions high privacy similar to cash, but AML checks apply above threshold

COM(2023) 364 - Regulation on legal tender of cash
Twin regulation to ensure cash cannot be abolished - response to Spain, Sweden moving cashless.

ECB Opinion CON/2023/34 of 31 Oct 2023: Welcomes legal tender status with mandatory acceptance, says it is essential for monetary anchor.

Timeline 2026: ECB preparation phase ends Oct 2025, pilot with Banco de España and 2 Spanish PSPs ongoing. EU Council wants political agreement by end 2026, ECB will not decide to issue until legislative act adopted.

2. The 5 Constitutional Debates

Debate 1 - ECB Competence: Can ECB issue Digital Euro under Art 128 TFEU?

Art 128(1) TFEU: ECB has exclusive right to authorise issuance of euro banknotes. Coins under Art 128(2) Council + Member States.

Two schools:

• Maximalist - ECB + Commission: Art 128 must be interpreted functionally. If euro as single currency must remain anchor in digital economy, ECB can issue digital form as banknotes. Supported by legal studies cited in Parliament report: "ECB is both entitled and obliged de lege lata to issue a digital euro on basis of Art 128 TFEU". Digital Euro is monetary policy, not just payment system.
• Minimalist - German Constitutional Court BVerfG + Bundesbank: Issuing retail CBDC is not monetary policy but economic/fiscal policy. Requires Art 133 TFEU legal basis + EU Parliament co-decision. Cannot be done by ECB alone under secondary mandate Art 127. Need Treaty change.

Debate 2 - Legal Tender - What Does It Mean?

Until 2021, legal tender for euro was only Commission Recommendation 2010/191. No Regulation.

CJEU finally defined it in Joined Cases C-422/19 and C-423/19 Hessischer Rundfunk - 26 Jan 2021. Most cited case for Digital Euro.

CJEU definition, now copied into Art 4 of both Digital Euro and Cash Regulations:

1. Mandatory acceptance as general rule
2. At full face value
3. With power to discharge from payment obligations

But CJEU also said: "It cannot be considered necessary for the use of euro as single currency to impose an absolute obligation to accept" - good faith exceptions allowed. Member States can regulate procedures for settling pecuniary obligations if cash payment remains possible in principle.

Constitutional implication for Digital Euro: If Digital Euro gets legal tender status, shops must accept it, but also may refuse cash? CJEU in Hessischer Rundfunk said limitations on cash are not incompatible with legal tender status if other lawful means are available. So Digital Euro could become alternative to cash that justifies cash refusal - huge political issue in Spain where cash still 60% of POS transactions.

Spain's position: Cannot phase out cash. ECB legal opinion 2023: Spain cannot impose general ban on cash, would breach EU Treaty. Banco de España: Digital Euro must be complement, not substitute.

Debate 3 - Privacy vs AML - Arts 7, 8 Charter of Fundamental Rights

EDPB/EDPS Joint Opinion on Digital Euro: Privacy is main objective. Offline low-value payments must be anonymous like cash. Online payments - pseudonymous with ECB not seeing personal data, only intermediaries.

Constitutional tension:

• German / Austrian constitutional courts: Right to informational self-determination + right to cash as expression of freedom. Digital Euro traceable = unconstitutional if no cash alternative.
• EDPB: Proposes thresholds - e.g., transactions <150 EUR offline with no AML check, as in Commission proposal.

Case law shaping this:

• C-37/20 and C-601/20 WM/Sovim - Beneficial ownership case - CJEU invalidated public access to registers as disproportionate. Used to argue Digital Euro transaction history cannot be publicly accessible or even accessible to ECB.
• C-293/12 Digital Rights Ireland - Data retention invalid. Any mass retention of Digital Euro payment data would be struck down.

Debate 4 - Financial Stability and Right to Property / Freedom to Conduct Business Art 16, 17 Charter

Spanish banks and German banks argue holding limits (e.g., €3,000) infringe freedom to conduct business and property rights if citizens forced to move deposits.

Conversely, former Banco de España Governor Miguel Fernández Ordóñez argues opposite: Digital Euro ends bank crises because it is safe asset, unlike deposits.

Constitutional question: Does ECB have competence to set holding limits that de facto expropriate bank funding? Art 219 TFEU proportionality test.

Debate 5 - Spanish Constitutional Order

Spain Constitution Art 149.1.11 - State exclusive competence on monetary system. Art 149.1.6 - commercial legislation. But monetary policy is transferred to EU.

Three Spanish specific issues:

1. Right to use cash: Spanish law cannot abolish cash. RD-law 8/2023 on cash availability: banks must ensure cash access. Digital Euro as legal tender must co-exist.
2. Ley 21/2011 Dinero electrónico: Banco de España authorises e-money institutions. Digital Euro is not e-money, is central bank money. Need amendment - noted in ECB Opinion Dec 2025.
3. Data protection: AEPD has flagged that Banco de España participation in pilot must comply with LOPDGDD.

Banco de España position evolution:

• Governor Pablo Hernández de Cos (2023): No pressing need, efficient payment systems already (Bizum). Concerns about financial stability + conspiracy theories show need for education.
• 2024-2025: Shifts to pragmatic support, joins pilot with 2 Spanish PSPs, emphasizes offline privacy similar to cash.

3. Case Law You Must Cite

Core Monetary Competence:

1. C-422/19 + C-423/19 Hessischer Rundfunk (26 Jan 2021) - THE case for legal tender
German public broadcaster refused cash. CJEU defined legal tender for first time and said member states can limit cash acceptance for public reasons if other lawful means available. This is now legal basis for both Digital Euro and Cash Regulations. Paragraphs 45-56 are copied verbatim into COM proposals.

2. C-62/14 Gauweiler (OMT) and C-493/17 Weiss (PSPP)
German Constitutional Court vs CJEU on ECB competences. BVerfG: ECB exceeded mandate. CJEU: ECB has broad discretion in monetary policy. Same fight will happen for Digital Euro. BVerfG likely to challenge Digital Euro issuance as ultra vires if based only on Art 128.

3. C-11/00 Commission v ECB (2003)
CJEU: ECB independence does not mean outside EU law. Applies to Digital Euro - ECB must respect GDPR, Charter even if independent.

4. C-370/12 Pringle
Defined monetary vs economic policy. Used to argue Digital Euro that includes holding limits and remuneration is economic policy, needs Council.

Privacy / Proportionality:

5. C-37/20 + C-601/20 Luxembourg Business Registers
As above, proportionality test for AML vs privacy. Directly cited by EDPB in Digital Euro opinion to demand offline anonymity.

6. C-140/20 Commissioner v Council (not digital euro but analog)
CJEU accepted that public policy reasons can justify cash refusal if proportionate.

Spanish:

7. Spanish Constitutional Court STC 233/2015 on cash payment limitations
Spanish law limiting cash payments to €2,500 for tax reasons held constitutional because other means available. Similar logic will be used for Digital Euro mandatory acceptance.

8. European Ombudsman case 2009/2010 on ECB letter to Spanish government
ECB letter suggested constitutional reform during euro crisis. Ombudsman said ECB can send confidential opinions on constitutional reforms if EU general interest at risk. Precedent that ECB can intervene in Spanish constitutional debate on Digital Euro.

If you are drafting a legal opinion for Spain, structure as:

Art 128 TFEU + Hessischer Rundfunk gives ECB prima facie competence to issue Digital Euro as legal tender, but secondary mandate (payment system, financial stability) under Art 127 + Art 133 required for app, distribution, holding limits. Spanish Constitution Art 93 (EU integration) allows transfer, but Art 128.2 Spanish Constitution? No, Art 149.1.11 does not block. Main constitutional risk is Art 18 CE right to privacy + Art 38 CE freedom of enterprise if holding limits disproportionate.