IMIA Hits the Ground Running

The official launch of the International Mint Industry Association (IMIA) took place at the World Money Fair in Berlin.

The IMIA has been established to promote cash and coin access and acceptance, with six mints as founding members. Martina Horakova is the Managing Director, Gerhard Starsich of the Austrian Mint its President and Marc Schwarz of Monnaie de Paris its Vice-President.

Appropriately for a research-based organisation, in January the IMIA issued a brief making the case for cash and for freedom of choice. The brief gave seven unique advantages of cash. The case made is not new, but it is a succinct document presented in a fresh way, focusing on both the personal and national stabilising functions of cash.

• National critical infrastructure resilience

To paraphrase, when all else fails, cash does not. Cash has the advantage that most people already know this payment product intuitively and have the habit of keeping some cash in the house as a reserve. Safeguarding cash infrastructure is a sensible thing to do for situations when off-line payments are the only solution, as cash does crisis-resilience better than the (few) alternatives.

• Privacy

It is not just privacy but also personal integrity. When people pay with cash no data is collected about them. They are also entirely safe from digital fraud. Nothing else delivers this, not even the much talked about Central Bank Digital Currencies.

• Cultural and social cohesion

Cash is a valued common reference point. The discussion created by the decision of the Reserve Bank of Australia, for example, not to put King Charles on the $5 banknote demonstrates the point. Cash is also class- less. Whether on benefits or a millionaire, cash is a common currency.

• Financial inclusion

Cash is available to all. In addition, it carries no transaction fees.

• Autonomy and financial security

As a way of holding value and because it is a physical, tangible item, it is straightforward for people to know how much money they have and, therefore, to exercise control of their finances. Over- spending, over-borrowing, and thus indebtedness is less likely than using cards, where it can be easy to go into debt. In addition, buying things with cash incurs no fees.

• Store of value

Holding cash is entirely independent and autonomous. It does not require permission or infrastructure. Linking to national critical infrastructure resilience, it is straightforward and, crucially, gives the individual the freedom to store as much as they need.

• Currency (value anchor), trust and financial stability

The majority of people happily hold money in bank accounts and spend it digitally. Everybody knows that if for some reason they want certainty, they can withdraw their money as cash. The ability to do that gives people the confidence to use the banking and digital payment system.

Without cash, the level of trust needed to be digital is significantly higher and this risks financial stability if people start seeking safety by moving funds.

‘Hard Law’ Needed to Safeguard Euro Cash

The IMIA has also published a position paper (2023/01 ¹) urging the European Commission (EC) to give legal certainty on the implications of the legal tender status of euro banknotes and coins in terms of mandatory acceptance and to enshrine it in secondary law.

The paper is prompted by the EC’s ‘Targeted Consultation on a Digital Euro’ which, in Section 3, discusses ‘making the digital euro available for retail use while continuing to safeguard the legal tender status of euro cash’. The IMIA summarises and explains the history of the uncertain legal position of euro cash, notes unique cash attributes that a digital euro will struggle to match, and proposes legal certainty across the euro area.

The paper describes the three key legal texts ² relevant to the legal tender status of the euro and the European Court of Justice (ECJ) 2021 ruling on euro cash ³.

IMIA view of the status of legal tender in the EU

In light of the ECJ judgement the current legal landscape is unsatisfactory. The EU should pass hard rule regulations defining the concept and term ‘legal tender’, and its implications on the obligation of point of sale service and goods providers, both private and public, to accept cash.

On a practical level, the network effect of cash cycle infrastructure means cash may be made unviable through individual and cumulative decision made about cash acceptance and cash acceptance barriers.

The singleness of the common currency should be superior to the current diversity and positions across member states on the issue of mandatory acceptance. The IMIA believes the EU should pass a hard law because it is in the public interest of the EU, the EU has exclusive competence for common monetary policy, the euro is a value anchor underpinning financial stability objectives, and the EU has competence to establish competition rules for the functioning of internal markets.

Legislative action proposed

The EU should reconsider the implications and reality of contractual freedom of two parties to agree on using another payment method. For business to consumer and government to consumer transactions, accepting cash as legal tender should be obligatory.

In some jurisdictions there are already measures requiring key services to accept cash, for example pharmacies and fuel stations. The IMIA argues it is more respectful to give citizens the decision about how to pay with public money in any situation.

Exceptions to the principle of guaranteed mandatory acceptance of euro cash should only be based on the ‘good faith principle’. For example, no more than 50 coins used in any single payment, the value of banknotes tendered should be proportionate to the value of the transaction, and cases where cash is not appropriate such as e-commerce. Refusal for security reasons at the point of sale and insufficient change should not be part of the ‘good faith principle’. If exceptions to mandatory acceptance are agreed, these should apply across the whole eurozone.

‘We are conscious that the potential lack of change is related to, increasingly deteriorating, access and deposit of cash conditions for retailers, as well as for consumers. Only if consumers have sufficient access to cash are they then in the position to have the notes and coins to make up the payment as close as possible to its amount. That’s why cash access and acceptance policy efforts should go hand in hand,’ Martina Horakova concludes.

1 - Clarifying the legal tender status of euro banknotes and coins – mandatory acceptance certainty at point-of-sale.

2 - Treaty on the Functioning of the European Union (TFEU), Regulation (EC) 974/98 (Second Euro-regulation), and EC Recommendation 2010/191/EU (Recommendation).

3 - https://curia.europa.eu/jcms/upload/docs/application/pdf/2021-01/cp210008en.pdf.