Value as Property: Private Law Integration of a Digital Currency
Abstract
The European Union’s exploration of a central bank digital currency, the “digital euro”, marks a pivotal development in the evolution of digital money and monetary infrastructure. Envisioned as a new form of legal tender, issued by Eurosystem central banks and distributed by private intermediaries, the digital euro raises fundamental legal questions both from a public and a private law perspective. As regards the latter, it is increasingly suggested to recognize the digital euro as “property” and to embed this decision within legislation at the EU level. Whilst this classification reflects a broader trend in the treatment of cryptoassets and digital money, it remains conceptually underdeveloped. In particular, the classification itself only serves as a starting point for the digital euro’s further legal integration, which must navigate the tension between the limits of EU competences and ensuring the uniform treatment of the single currency’s digital version. This paper seeks to address both issues, further contouring the digital euro as “property” within the boundaries of EU competence. It will be developed that clarifying transfer modalities for the digital euro, recognising its character both as a new payment asset and a new payment system, offers a practical path toward broader private law integration. It will also be established that EU harmonisation in this regard is possible based on Article 133 TFEU. Stipulating a corresponding lex ferenda will provide the legal certainty needed to support the digital euro’s adoption across – and potentially beyond – the internal market.
1 Introduction
The legal classification of cryptoassets and digital currencies as “property” has gained considerable traction in recent years,[1] reflecting the need to clarify the legal status of these novel assets, particularly regarding the rights accruing to holders and the rules governing their transfer within private law. While many digital currencies are neither truly currency nor money,[2] the emergence of central bank digital currencies (CBDCs) may mark a turning point in this respect. Their introduction is explored world-wide,[3] including also a “digital euro” project within the EU, aiming to make the single currency available in digital format to the general public for the first time ever. Legislative work on both its design and status is ongoing, though gaps remain in an important legal area: private law.
This gap is significant since private law determines whether and how the digital euro can be used for payment, a question which essentially depends on the digital euro’s legal nature[4] and extends into the realm of private international law due to the digital euro’s inherent cross-border nature.[5] Following the abovementioned trend, a growing body of research calls for clarifying the digital euro’s private law ramifications, particularly its legal nature as “property”. Within the EU’s fragmented legal landscape, such stipulation alone can only serve as a starting point, however. Its broader implications must be clarified for the digital euro to function seamlessly across Eurozone borders, while the latter’s legal integration must respect the limits of EU competence in private and, in particular, property law. Both issues remain remarkably underexplored in legal research.
The aim of this paper is to address this lacuna by examining the consequences of classifying the digital euro as “property”, outlining basic principles for a potential lex ferenda, before turning to the question of EU competence for a corresponding piece of legislation. The paper will start with a brief synopsis on the digital euro, explaining the underlying rationale of its treatment as property and introducing the core issues to be addressed (2). Discussing these in detail, the following section will focus on setting out how property rights in digital euro can be created, transferred, held, destroyed, and protected, building on the common building blocks of continental European property law regimes (3). The feasibility of implementing a lex ferenda thus scoped out will then be considered (4), connecting the digital euro’s private law integration with the scope of EU competences. It will be developed that common transfer principles can serve to suitably integrate the digital euro into existing private law frameworks, with the EU possessing the necessary competence to legislate in this regard. The paper will end with a corresponding conclusion, including an outlook on future developments (5).
2 The Digital Euro as Property
The digital euro project has advanced considerably in recent years, with numerous official publications, including learnings from a prototyping exercise and a Regulation Proposal,[6] outlining its prospective contours. The Regulation Proposal importantly designates the digital euro as legal tender,[7] confirming its status as “proper” currency – that is, a sovereign-determined monetary medium for transferring and storing value.[8] This designation also makes the digital euro “money” in a legal sense,[9] establishing it as the official default means to discharge monetary obligations across the Eurozone.[10] To fulfill this function, its integration into private law is essential,[11] which currently distinguishes between two forms of money. Cash, as “public money” issued by central banks as a tangible movable “thing”, is a suitable object for the in rem right of ownership to attach – for short, it is property governed by property law.[12] “Private money” issued by market actors such as commercial banks, PayPal and the like,[13] is construed as an in personam [14] claim to payment in cash against its issuer – and thus not property as defined above.[15] This dichotomy, in turn, shapes both transfer requirements and the protection of money holders.
Official publications on the digital euro avoid clarifying its place within the current system, rather situating it uneasily within the dichotomy. The digital euro is intended to supplement euro cash – both on- and offline[16] –, likewise being issued under the ultimate responsibility of the ECB as a liability of the Eurosystem’s constituent central banks.[17] However, it will not necessarily be accessible without the need to rely on a third party.[18] Distribution and management of digital euro holdings and transactions is entrusted to intermediaries,[19] instead of the issuing central bank(s) maintaining contractual relationships with users for these purposes.[20] Nevertheless, these intermediaries will solely be “acting on behalf of digital euro users”[21] and are expressly “not a party to”[22] the digital euro as a direct liability between the involved central banks and digital euro users. Whilst this underlines the digital euro’s status as proper public money, the private money-like intermediated setup produces a curious duality: the digital euro is both a new payment asset, akin to cash, but at the same time also a new payment system,[23] split into a settlement back-end, remaining in the hands of the Eurosystem, and a user-facing, privately handled front-end,[24] where digital euro will be held in a separate “account” made accessible through an app, some other online interface, a physical card, a (cryptographic) wallet, or other options currently being explored.[25]
Despite its peculiar nature, previous research has established that the digital euro should be classified, like cash, as property.[26] This classification rests on its construction as a standalone object, mirroring the traits of traditional property and unsuitable to be treated as an inter partes claim.[27] Such an understanding might seem suggested by the description of the digital euro as “liability” of its issuing central bank(s).[28] However, it is repeatedly stressed that these central banks do not maintain a direct relationship with digital euro users on which such claim could rest.[29] Similarly, it is in any case doubtful what content such a claim would have, as public money within the current monetary system is not underpinned by an issuer’s (re-)payment commitment, and thus without any material content to a “claim” on, or “liability” of, its issuer.[30] In fact, the essence of public money lies not in any specific claim, but rather in that it is intended to function, in a generalised, thus legally non-enforceable manner, within an entire community to exchange anything of value with anyone else being part of said community.[31] In line with the curious clarification in the Regulation Prppoposal itself – that the digital euro is a liability “like euro banknotes and coins”[32] – the liability characteristic of the digital euro should be interpreted only, if at all,[33] “in an accounting sense”.[34] , [35]
The digital euro is accordingly better understood as a standalone object, comparable to cryptoassets. Both can be grasped – though not physically – in an ideational manner, with their behaviour in everyday use perceived similarly to that of tangible objects.[36] Likewise, irrespective of their private law recognition,[37] both come into being and are handled through computer operations,[38] assigning certain values to specific users and employing mechanisms to prevent the issue of double-spending.[39] Thus displaying the characteristics of exclusivity and rivalry in use, they are again similar to traditional, tangible property.[40] The construction of the digital euro as a standalone object thereby ensures that digital euro users enjoy a direct entitlement to “their” digital euro, unfettered by the presence of intermediaries, as is foreseen in the Regulation Proposal. Importantly, understanding the digital euro as property turns it into a suitable object for the right of ownership – as the comprehensive right to use and control[41] – to attach.
3 A Property Ecosystem
The classification of the digital euro as property raises more questions than it can answer.[42] After all, concepts of property – and its further integration into private law – differ across jurisdictions, with the corporeality, physicality, or tangibility of objects often remaining central.[43] To avoid an unbounded discussion, this paper proceeds on the premise that a stipulation of the digital euro’s legal nature as property at the EU level is necessary, but not itself sufficient to ensure its legal integration. The following analysis therefore focuses on developing common principles drawn from the common building blocks of continental European property law regimes.[44] These principles serve to address five fundamental questions: (1) what is the object of ownership, (2) how is ownership acquired in derivative and original form, (3) how is it lost, (4) what role do the intermediaries play in relation to the digital euro as property, and (5) how are digital euro owners protected, both within and outside property law? It will be argued that answers to the first two questions can largely resolve also the latter three. On this basis, the digital euro can thus be integrated as a new object for existing property rights to attach, requiring only a minimally invasive lex ferenda.
3.1 Object and Scope
With the digital euro classified as property, the first issue is to delineate the precise legal object to which property rights, particularly ownership, attach. The necessity of this delineation follows from the principle of speciality or specificity, which demands the object of a property right to be individually distinguishable.[45]
In this regard, cryptoassets offer a useful parallel. Legal debates here often refer to “token” as the relevant object, but this term is imprecise: it suggests the existence of a uniform “digital coin” which rarely exists in practice.[46] A good example for this is the cryptocurrency Bitcoin. As a unit of account denoting 100 million satoshi, its “transfers” are recorded based on the UTXO data model. UTXO is short for unspent transaction output, meaning that Bitcoin essentially resemble transaction data “allocated” to a specific cryptographic key pair. Each transaction consumes an earlier UTXO as input and assigns new output to the receiver’s key pair, rendering the input unusable for further transactions. The output, in turn, is usable as UTXO in a future transaction.[47] Other cryptoassets, such as Ethereum, instead rely on an account-based model, simply mathematically updating account balances by subtracting or adding nominal value.[48] Classifying cryptocurrency “token” as property can thus be done in various ways: the object can be the individual UTXOs – or other “data strings”[49] – making up the recorded holdings,[50] or it can be the ideational unit,[51] either in its smallest denomination (the satoshi),[52] the full denomination (one Bitcoin), or the entire balance held (e.g., 8 Bitcoin).[53]
For the digital euro essentially the same options exist, complicated however by two factors. First, its technological implementation is of yet undecided. The digital euro’s prototype has tested both a UTXO-based architecture – similar to Bitcoin, but not reliant on distributed ledger technology[54] – for the online version of the CBDC, as well as an account-based design for the offline version.[55] Technologically, the digital euro might thus have no uniform appearance. Secondly, as money, it essentially remains a function, for “money” itself is defined as such, serving as a medium of exchange, a store of value, and a unit of account.[56] With the digital euro thus circulating as a perfectly fungible manifestation of abstract economic value, it is difficult to grasp as a legal object.[57] Unlike the case for cash, there is no corporeal body to which the law could attach, and, as established, there also exists no claim-like relationship which could contour a legal object.[58]
Yet it is this adversity which can be turned into opportunity.[59] To ensure a uniform legal treatment – and thus, as foreseen, user experience[60] –, the legal object must not depend on the book-keeping mechanism chosen, which is both irrelevant and indetectible for digital euro users in the first place.[61] Instead, it should be the unit, or rather the economic or “transactional” [62] power conferred through it, which constitutes the relevant object.[63] This, essentially, turns value into property. It should not be misunderstood, though, as creating a sort of “floating ownership” over the likely continuously fluctuating balance held in a digital euro account. Such construct would be rather alien to continental European property law systems, which centre around individualisable, specifiable objects and the interests therein.[64] Instead, the proper object is each euro-cent,[65] even where one would colloquially, or for sake of simplicity, refer to ownership of its hundredfold, the euro.
At first sight, however, this object similarly lacks identifiability, since each euro-cent is indistinguishable from one another.[66] A lack of uniqueness, however, is inherent in any asset functioning as money,[67] whose role as a uniform means of exchange depends on individual characteristics becoming irrelevant, allowing the assets in question to circulate in a perfectly interchangeable, fungible manner.[68] Identifiability, or individualisability, is not itself inhibited by such fungibility. While two notional digital euro or euro-cent cannot be told apart, it is perfectly possible to say that one of them belongs to A, whereas the other one belongs to B – as is the case for two fully identical one-euro coins. Instead of relying on the proxy of (physical) possession,[69] this is ensured for the digital euro by its users technically only being authorised with respect to the denominations credited to their accounts, at the same time ensuring that digital euro are exclusive and rival in use. Individualisability – and thus compliance with the principle of specificity – hence follows from the underlying technological assignment and the potential for arithmetic traceability across transactions.[70] The legal object regarding the digital euro can thus be defined more precisely as each euro-cent as allocated through the underlying system.
This definition recognises that the legal object is not itself equivalent to, but nonetheless dependent on, its underlying technology, remaining agnostic as to its specific implementation. It turns elusive economic value into a suitable object satisfying the principle of specificity, and automatically allows for co-ownership where digital euro are assigned to several subjects jointly.[71] The question remains how such novel object fits within existing property law, with continental European jurisdictions commonly distinguishing between tangible and intangible, movable and immovable objects[72] – categories to which the digital euro, like other digital assets,[73] does not necessarily correspond.
3.2 Acquisition
The doctrinal distinction between different types of objects surfaces particularly with the rules governing their transfer. Clarifying the digital euro’s fit within existing property law frameworks is therefore best achieved through a closer examination of its transfer modalities. Incidentally, these are also decisive in governing its function as a circulating means of exchange, providing perhaps the strongest case for Union-level harmonisation. The following subsections will accordingly address voluntary derivative acquisition of ownership (1) before turning to original acquisition focusing on the issue of commingling (2).
3.2.1 Derivative – Transfer
Derivative acquisition of ownership turns on two fundamental distinctions: that between a tradition versus a consensual system, and that between a causal and an abstract system.[74] For the digital euro, it will be established that an abstract tradition system is most suitable, with ownership transfers thus requiring a specified act of transfer and being independent in their effect from an underlying obligation. Examples will be used throughout to illustrate the conclusions reached. To start with, consider:
Example 1
A (seller), and B (buyer) agree to the sale of a book for € 10, to be paid in digital euro. B has 20 digital euro in their digital euro account and takes no further action, whilst demanding delivery of the book. A only wants to deliver the book in return for the digital euro. B alleges that ownership in the digital euro owed has already been transferred upon conclusion of the contract.
3.2.1.1 Requirement of an Act of Transfer
The above example illustrates that a further act beyond a mere agreement is needed to satisfy both the principle of specificity, and that of publicity for property rights, as another tenet of property law requiring that third parties can ascertain the existence and extent of property rights.[75] Accordingly, even where ownership can in principle pass solo consensu,[76] exceptions are made for generic goods,[77] with specific items needing to be individualised first[78] – for cash usually coinciding with the delivery of the object in question.[79]
The digital euro warrants no different treatment in this regard. Though specifiable enough to qualify as property, it is not an inherently unique object.[80] Like cash, a digital euro is perfectly interchangeable with others, whilst parties attach no particular interest to which specific ones are transferred.[81] To meet the requirements of specificity and publicity, digital euro must therefore be individualised. This can be linked back to the system which generates them in the first place, since it would seem counterintuitive if ownership could pass bypassing said system. A corresponding system-level change should thus be required as an act of transfer, akin to the physical delivery of coins or banknotes.[82] The remaining issue is what exactly could constitute such an act.
3.2.1.2 (Change of) Control
Consider for this issue the following examples:
Example 1a
A and B agree to the same contract as above. B initiates a transfer, whereby B’s digital euro holdings are reduced by 10 units, and A is credited 10 digital euro to their account.
Modification: A has prior lost the credentials to access their account.
For tangible movables, publicity in ownership transfers is usually tied to possession; for immovables or incorporeals oftentimes to registration.[83] As established by previous research,[84] the idea of treating system entries as a digital register for property rights – often proposed for cryptocurrencies[85] – isn’t well suited for the digital euro, since it is both uncertain,[86] and unlikely,[87] that it will operate with a single, accessible, and comprehensible “register” suitably providing publicity. The better analogy to draw instead is that to possession, rid of its references to corporeality[88] understood as a factual relationship between subject and object marked by the former’s ability to control the latter.[89] A closer definition is provided in the UNIDROIT Principles on Digital Assets and Private Law,[90] in Principle 6(1) granting control where:
[…] the digital asset, or the relevant protocol or system, confers on that person:
the exclusive ability to prevent others from obtaining substantially all of the benefit from the digital asset;
the ability to obtain substantially all of the benefit from the digital asset; and
the exclusive ability to transfer [these] abilities to another person; and
the digital asset, or the relevant protocols or system, allows that person to identify itself as having the abilities set out in paragraph (a).
This describes, in a technologically agnostic manner, the situation for the digital euro. The abilities in (a) follow from the assignment of digital euro to users’ accounts, while the identification ability of (b) depends on satisfying corresponding access requirements[91] – be that the knowledge of private keys, passwords, PIN-codes, biometric data, or else.[92] In this vein, B evidently controls the 20 digital euro credited to their account, similar to how they would possess cash in a traditional wallet. For the transfer of ownership in digital euro, accordingly, a “change of control” – defined in Principle 6(2) of the UNIDROIT Principles as a transfer of the abilities in subparagraph (1)(a) – is a suitable replacement for the passing of possession otherwise relied upon as a general mode of transfer.[93]
Following this, in example 1, B cannot allege to have paid A, as B has not relinquished their control. In example 1a, however, B did so with A gaining control, thus enabling ownership acquisition. This holds true even for the modification of 1a, where A has lost immediate access to their account. As control lies in the ability to exclude others, use the object and transfer said abilities to third parties, A, as the rightful account holder presumably able to request a re-issuance or reset of their access credentials,[94] has not irrevocably lost control over those digital euro credited to their account.
A problem linked to the precise definition of control arises with another alteration, however. Consider for this
Example 1b
A and B agree to the same contract as above. B does not initiate transfer as in example 1a, but agrees that they will hold, from now on, 10 digital euro in their account solely “on behalf of A”.
Control can be seen either as a “purely factual matter”,[95] in essence corresponding to direct possession,[96] or as a normative one,[97] allowing the applicability of alternative modes of transfer tailored to non-direct possession.[98] If control were defined normatively, one could control digital euro through someone else, with A thus acquiring ownership in example 1b by virtue of their agreement with B. This, however, would allow property rights in the digital euro – as a system-specific asset – to change without any adjustment in the system,[99] and should therefore be rejected. The digital euro's classification as property was only possible because the object, abstract notional value, is made delimitable and individualisable through the underlying technological system; without a corresponding change in allocation, ownership can thus not shift. This system-specificity is underscored with a modification of example 1b, with A and B agreeing that B holds 10 of their 20 digital euro “for A”, but B then transferring 15 digital euro to an unsuspecting C the day following. It is impossible to make out which 10, out of the original 20, digital euro B intended to hold for A, and thus, whether the remaining 5 now belong to A or B. Control must therefore be defined with system-specificity in mind on factual terms, grounded in the allocation of values to specific accounts.[100] Accordingly, derivative transfers of ownership require the functional equivalent to a transfer of direct possession.[101]
3.2.1.3 Acquisition in Good Faith
Example 2:
A has 10 digital euro in their account. B acquires A’s account access credentials through hacking, and transfers the 10 digital euro to C in order to pay for a notebook bought online using a pseudonym. C knows nothing of the hack.
Modification: B did not hack A’s account, but is A’s seven-year-old child, who managed to obtain A’s access credentials. They transfer the 10 digital euro to the likewise ignorant C.
Derivative acquisition of ownership requires the transferor to have the “right or authority to transfer ownership”.[102] For cash, this requirement is usually relaxed in the interest of negotiability. It can often be acquired in good faith even when stolen or lost,[103] since requiring payees to trace prior ownership, or having later transactions undermined by flaws in earlier ones, would create intolerable frictions for commerce.[104] The same must apply to the digital euro, as a cross-border means of payment required to circulate without frictions. The interest of original owners is not disproportionaly disregarded by this decision, as they may still be entitled to claims outside of property law.[105] Likewise, they can protect themselves against unauthorised transfers, much like protecting bank account login credentials, whereas it is burdensome, if not even impossible, for transferees to ascertain the authority of transferors other than by successfully receiving digital euro.[106]
Bona fide acquisition should thus be provided for, with control again replacing possession – whether as the vehicle for publicity creating legitimate belief in the transferor’s legal authority,[107] or simply where its change is required as a prerequisite for bona fide acquisition.[108] This aligns with parties’ expectations that whoever can initiate a transfer – and thus a change of control – is authorised to do so.[109] A transferee should accordingly be protected in this belief, regardless of whether the original owner can be deemed responsible for the transfer, or whether they have “lost” their digital euro in any other way.[110]
Extending this protection to other defects in the transaction, such as a lack of legal capacity as the case in the modification of example 2, is possible by policy choice, but assumed here to run counter to current conceptions of bona fide acquisition,[111] and thus rejected. In any case, good faith is excluded where the transferee could “reasonably be expected to know”[112] of the defect remedied at the time of acquiring ownership,[113] and a transfer “for value” should not be required, insulating property acquisition from the obligatory side of transactions.[114] What remains to be stated in any case is that a bona fide acquirer should be able to acquire the full right of ownership unencumbered by any limited property rights.[115] In example 2, thus C acquired ownership in good faith; in the modification, however, the defect in B’s legal capacity is not remedied, meaning C did not acquire ownership.
3.2.1.4 A Real Agreement and the Principle of Abstraction
The decision to insulate the proprietary from the obligatory side of digital euro transactions alluded to above merits closer attention, as it is proposed here to go further than just influencing the prerequisites for bona fide acquisition. In effect, a principle of abstraction is proposed to apply, in turn requiring a separate agreement from the underlying causa pertaining the transfer of ownership. Such real agreement, familiar for tradition systems,[116] can be implied – where not explicitly expressed – at the latest with the change of control replacing traditional delivery.[117] It thereby provides the foundation to separate and abstract the proprietary from the obligatory level.
Support for such abstraction could be found by turning to Liechtenstein’s “Blockchain Act” (TVTG).[118] Its Article 6(3) prescribes that token transferred without a valid causa can only be reclaimed through the law of unjust enrichment, thus seemingly stipulating a principle of abstraction contrary to Liechtenstein’s general property law.[119] This decision, however, rests on the immutability of transactions recorded on the blockchain, alleged to enable retransfers of token only through the initiation of a new transaction.[120] This argument carries little weight for the digital euro, as it is decidedly not construed as a particular UTXO or other data string, but rather as a (social) construct of abstract value, which could be retransferred despite individual transactions being irreversibly recorded.[121] Nevertheless, the digital euro’s system-specificity similarly supports abstraction, as ownership could otherwise fall back ipso iure where the underlying causa is voided, without any corresponding change of control in the system itself. This risks divergence between legal ownership and factual allocation, undermining legal certainty,[122] and importantly also the assumption underpinning bona fide acquisition,[123] namely that factual control matches legal authority.[124]
Most importantly, following a principle of abstraction allows property transfers to be assessed in a uniform manner for cross-border transactions, which are likely frequent with the digital euro intended to be used throughout the Eurozone and beyond.[125] Consider for illustration
Example 3
A and B agree to the sale of a book for 10 digital euro. The contract is concluded in France, with both parties present there, choosing French law to apply to it. B initiates a transfer, whereby B’s digital euro holdings are reduced by 10, and A is credited 10 digital euro to their account. Three days later, the sales contract is voided. A has prior transferred all their digital euro to C, who held no digital euro before this. The contract between A and C was concluded in Germany, with both parties present there, choosing German law to apply to it.
Modification: A and B choose German law as the applicable law to their contract, despite both being located in France. The contract is subsequently declared void due to A successfully challenging it on the grounds of having misspoken – in an inexcusable manner – when concluding the contract with B, based on § 119(1) of the German Civil Code (BGB).
Assuming, for simplicity, that the lex situs governs proprietary aspects of the digital euro as it would for cash, and the situs of the digital euro follows the parties’ location,[126] A initially acquired ownership in example 3 under the French causal system, but this acquisition retroactively fails upon the voidance of the sales contract. Where C suspects trouble, they would have to investigate further and resolve which law applied to A’s ownership acquisition to make sure they can acquire such themselves.[127] The modification highlights cross-border complications even more clearly. As French property law requires a valid contract for ownership to pass, and this contract – subject to its German lex contractus – is void, ownership cannot pass from A to B. The difficulty is, however, that the ground for voiding the contract is unavailable in French law,[128] where it – and thus the transfer of ownership – would have remained valid.[129]
Applying a principle of abstraction allows property rights transfers to be insulated from such complications caused by the entanglement between property law and the law of obligations.[130] Ownership acquisitions can be ascertained uniformly and with certainty regardless of the parties’ location, the law applicable to any underlying causa, or the invalidity of such following nationally divergent causes and effects for void, voidable, or provisionally invalid contracts.[131] It would rather be possible for uniform rules to specify when ownership in digital euro should not pass, tailored to the digital euro system itself.[132] This is preferable given the digital euro’s inherent cross-border usability and need to ensure legal certainty nonetheless.
3.2.2 Original – Commingling
Building on the discussion of derivative acquisition, a closer look at original acquisition sheds additional light on the digital euro’s contouring as property. The focus here will be the only truly problematic situation for its everyday use:[133] commingling, understood as the coming together of digital euro belonging to different owners in a single account, with individual units thus difficult – if not impossible – to identify.[134] Consider the following
Example 4
A has 10 digital euro credited to their account, which B manages to access and forward to C. C knows that B was not authorised to effect this transfer. C already has 40 digital euro credited to their own account at the time the other 10 are added.
Following the above considerations, C cannot acquire ownership derivatively from B, as C is not in good faith. The 10 digital euro are now commingled with C’s own 40, however. Two questions thus arise: can digital euro held in a single account still be individualised to preserve original ownership, and if not, what legal response should follow?
The first question can be answered concisely: once digital euro of different owners are commingled in a single account, they can no longer be individualised. This follows directly from its recognition as abstract value, indistinguishable from another unless assigned to a specific subject.[135] How this manifests in practice was already illustrated with example 1b and its modification, where B sought to hold 10 of this 20 digital euro for A, but ended up sending 15 to C. It is factually impossible to tell whose digital euro ended up being spent: 10 of B’s and 5 of A’s (held with B), or 10 of A’s (held with B) and 5 of B’s? At least for example 4, a normative “tracing”[136] rule could theoretically overcome this issue, for example by assuming that the last units added to an account correspond to those transferred with the last incoming transaction. This would allow A to identify their 10 digital euro in C’s account, and correspondingly revindicate them.[137] Such a rule, however, fails where frequent in- and outflows occur, effectively returning to considerations to be had where identifiability is negated, and commingling needed to be resolved otherwise.[138] It is thus proposed that such considerations should not establish factual identifiability, but only resolve the resulting commingling. Accordingly, digital euro of different owners in one account cannot be treated as individually identifiable.[139]
Two general options then exist to resolve the situation arising. The first is to assume co-ownership in a proportional share,[140] the second to assume sole ownership of the one controlling the whole, with the others involved referred to claims for compensation.[141] The first option seems fair,[142] and easy to apply as co-ownership shares can be calculated from the nominal quantities contributed at the time of commingling,[143] with each co-owner potentially even granted the right to separate, or sole authority to dispose, their share.[144] But difficulties arise again once balances fluctuate. Whereas a decrease can be addressed easily – the proportion of co-ownership remains the same, but its reference quantity is reduced[145] – addressing increases is more difficult. Inflows could be considered (1) relevant as replenishing the co-owned whole – (a) either only up to the point of its original size, or even (b) beyond –, (2) deemed entirely irrelevant, or (3) relevant only where the inflow results from specific transactions.[146] Any option but (2) would essentially reintroduce an already dismissed “floating ownership” through the back door,[147] and should thus also be dismissed – at least where the digital euro is to be integrated into current property law systems.[148] As a consequence, however, the utility of the co-ownership solution can be doubted. Digital euro holdings likely continuously fluctuate with considerable outflows, seeing that they are foreseen to be automatically funded and de-funded from regular bank accounts through the so-called “(reverse) waterfall” functionality.[149] Moreover, evidentiary issues arise, as proving one’s share requires reconstruction of another’s original account balance.[150] From a practical perspective, co-owners also cannot access or separate their share except through the controlling account holder, who might have spent the funds already, rendering co-ownership more of an academic gimmick than a practical solution.
Against this background, assuming sole ownership of the account holder in whose account digital euro are commingled offers a more coherent, straightforward solution, additionally consistent both with the digital euro’s system-specificity and with the assumption behind bona fide acquisition, namely that control implies authority to transfer. Indeed, many jurisdictions providing initially for co-ownership already reach the same result for cash in any case.[151] The former owner(s) loss can then be addressed through claims in delict or for unjust enrichment,[152] which are congruent to their value-interest in any case. Applied to example 4, hence, A lost ownership through the commingling in C’s account, with claims for restitution or damages against B, as commingler, and/or C, as beneficiary of the commingling, not barred.
3.3 Loss
Following the above findings, addressing the loss of ownership in digital euro is straightforward. It occurs, of course, where another acquires it, or where the object itself ceases to exist – for instance, where digital euro are converted into private money or cash,[153] or where the entire system ceases to function.[154] It is important to remember, however, that the digital euro is not congruent, as an object of property rights, to technological bookings. Ownership is thus not necessarily lost where these bookings disappear or change. Crucially, a change of control is required to transfer ownership, but not every change of control itself results in such transfer.
3.4 The Role of Intermediaries
So far, the focus has been on the digital euro as a standalone asset and the legal relationship between it and its users, consistent with property law concerning the direct link between an object and a subject, as well as the resulting consequences thereof for other subjects.[155] The digital euro is, however, also an intermediated payment system, raising the question of how intermediaries affect the relationship and corresponding property framework outlined above. Amongst the several types of third-party actors involved within the digital euro, “intermediaries” in the sense employed here are solely payment service providers following the definition within the second Payment Services Directive (PSD2).[156] These include in particular so-called “account servicing” providers offering core services such as holding accounts, funding and defunding, and initiation/reception of payment transactions.[157] Foreseen in this role are particularly credit institutions, such as commercial banks,[158] with these thus likely to provide also the link between the user-facing front-end, and the Eurosystem back-end.[159] Given their central function and the already existing regulation with regard to their provided private money, the following analyses focuses on these specific actors. It will be illustrated that the system’s setup could significantly affect users’ positions in the digital euro as “their” payment asset, exposing also gaps and inconsistencies within the current Regulation Proposal on the digital euro.
3.4.1 Impossibility of Sole Ownership?
Perhaps the most crucial issue to be addressed is whether intermediaries can undermine the construct of sole ownership accruing to users. Of course, reliance on third parties to exercise one’s ownership is not in itself detrimental,[160] but concerns arise from the digital euro’s system setup and the specific interaction between front- and back-end. In this regard, concerns are well-known for cryptocurrencies and intermediated securities where intermediaries maintain “omnibus accounts”. For cryptoassets, this essentially refers to the maintenance of a common blockchain address by the intermediary, to which clients’ assets are linked.[161] Clients have no direct access to these assets and cannot factually control them, as the intermediary holds the necessary private key to initiate changes on-chain,[162] but are rather credited “their” assets based on subsequent internal bookings by the intermediary. This is, to an extent, similar to the collective custody of securities, where those of different clients are pooled at an intermediary.[163] Both models offer functional advantages, such as reducing administrative burden by avoiding constant updating to the official back-end.[164] Compared to the maintenance of segregated accounts, the relationship of clients to “their” assets becomes truly intermediated,[165] making sole ownership questionable: either it disappears altogether, as no individualisable object can be made out anymore,[166] or it is reduced to co-ownership in the pooled whole maintained by the intermediary.[167] Both approaches conflict with the property framework outlined above, as even co-ownership undermines the utility of the principles set out.
The official publications on the digital euro do not specify the functional setup or precise account structures within the digital euro system. Some inferences, however, can be made from the Regulation Proposal. It emphasises that intermediaries are not “party to a digital euro payment transaction”[168] – buttressing that intermediaries do not intersect the direct relationship between digital euro and its users –, that transactions should settle instantaneously, and that “no options to net should be allowed”.[169] This points to a system designed to function akin to a real-time gross settlement (RTGS) system, where each transaction is processed individually up to the settlement layer at the back-end instead of only certain balances from previously offset transactions doing so.[170] In turn, this undermines a main advantage of omnibus accounts – avoiding individual settlement within the back-end layer. Whether this rules out omnibus structures entirely, however, remains unclear. Whilst the above insinuates that users interact directly with the back-end via their front-end interface, such direct connection already seems interrupted for offline payments, which shall settle once the digital euro holdings in the local storage device are updated.[171] This does not seem to require an update in the back-end, as connection to this layer requires an online connection.[172] It is similarly conceivable, even within an RTGS, that a structure of up- and downstream accounts exist, without the digital euro user being privy to all of them.[173] Clarifying the legal impact of intermediation therefore requires closer examination of the intermediaries’ specific position, vis-à-vis the users, regarding the digital euro.
3.4.2 Depositaries, Custodians, or Technological Enablers
This examination can draw on parallels to both cryptoassets and traditional banking. Since commercial banks are foreseen as the default gateway to access digital euro, equating digital euro accounts with ordinary bank accounts – rooted in the depositum,[174] specifically the depositum irregulare – seems particularly tempting.[175] Where this is done, users would lose ownership and hold only a repayment claim against their intermediary,[176] whereas the latter acquires ownership and must merely provide equivalent value.[177] Whilst users are not prevented to voluntarily place their digital euro into such an arrangement,[178] the official publications make clear that such is not the intended default for the European CBDC.
Unlike cash, the very existence and use of the digital euro already depends on infrastructures maintained by intermediaries.[179] If every user-intermediary relationship were automatically treated as a regular bank deposit, the digital euro’s construction as a “direct liability” [180] of the issuing central bank(s), decidedly not sitting on an intermediary’s balance sheet,[181] would be entirely undermined. While advantageous for intermediaries,[182] such treatment would reduce users’ positions to that of ordinary private money holders – contradicting the digital euro’s intended nature as public money,[183] and thus also the “unique selling point” for its introduction.[184] Equally problematic in this regard is the construction of a depositum regulare, presupposing the safekeeping of an asset to be returned in natura at a later date,[185] which would undermine the digital euro’s functionality as a circulating means of exchange.
Similarly, it is questionable whether intermediaries “hold” digital euro for their clients like a depositary would. This, of course, largely depends on the technical setup of the digital euro, but the prototype suggests no deposit-like relationship. Instead of relying on a traditional account – in which digital euro were held like cash in a vault – access to digital euro relied on wallets,[186] well-known from the realm of cryptoassets. Unlike their name suggests, these merely “store” cryptographic keys required to access assets, rather than the assets themselves.[187] Wallet-providing intermediaries thus do not hold digital euro like a depositary would.[188] Instead, recurring back to the digital euro’s functionality as circulating (public) money, intermediaries rather seem to act simply as “technological enablers”,[189] not holding their clients’ CBDC but handling CBDC transactions.[190]
Still, intermediaries are not necessarily entirely remote from the digital euro from a private and property law perspective. Omnibus structures could be implemented with the wallet solutions just mentioned, which could affect both an end-user’s ownership and control as construed above. As concerns ownership, however, it is clear from the official contouring of the digital euro – public money separated from intermediaries – that it must remain with the user.[191] The current Regulation Proposal itself seems slightly incoherent in this regard. Whilst foreseeing insolvency remoteness of digital euro held through intermediaries,[192] it holds the PSD2 applicable,[193] thus presuming parallels between digital euro and regular private money – where ownership, as shown, would lie with the intermediary. One might interpret this to allow for a (Civil Law) trust-like relationship, with ownership passing to intermediaries,[194] but respective assets remaining economically attributable to clients in case of insolvency.[195] As recent experiences with cryptoassets show, however, truly ensuring the insolvency-remoteness of the digital euro would then require extensive regulatory safeguards, particularly as regards the maintenance of the assets held in trust.[196] The Regulation Proposal would do good with further clarifications to ensure the digital euro retains its direct connection between central bank(s) and end-users.
3.4.3 Transfer, Control, and the Payment Services Directive
Clarifications are also necessary regarding the intended applicability of payment services law, with the Regulation Proposal stating that “payment service providers distributing the digital euro should be subject to the requirements laid down”[197] in the PSD2, and proposed changes within a PSD3[198] encompassing all central bank money issued for retail use – thus including the digital euro – within its definition of “funds”.[199] This raises the question whether both the regulatory and the private law aspects within payment services law are supposed to apply to the digital euro.[200] The latter, fully harmonising the relationship between intermediaries and their clients,[201] could significantly influence the developed principles for CBDC transfers.
The least intrusive way to reconcile the property construction of the digital euro with the applicability of payment services law would be to read the latter’s requirements into those on derivative acquisition. A proper payment order, and/or the authorisation of the payment transaction, seem obvious addenda in this regard.[202] This would explicitly protect account holders by ensuring that only the one registered with their intermediary, and thus “truly” entitled to the value held, can effect changes therein. However, such protection is in principle ensured already by requiring the transferor’s right or authority – commonly coinciding in the person of the account holder. Pulling the relationship to a third party – the intermediary – directly into the otherwise peer-to-peer transfer construction unnecessarily complicates legal assessment, particularly where bona fide acquisition is concerned. In any case, ensuring the proper circulation of the digital euro, it would seem necessary to expand the scope of the latter to cover also the existence of a payment order and/or authorisation, rendering the additional protection afforded through payment services law moot. The same holds true where existing concepts, such as control, are interpreted with payment services law in mind.[203]
A more radical approach, largely rendering the above considerations superfluous, would be to assess digital euro transfers exclusively via payment services law. In result, its application may even often correspond to the above property construction, for example by isolating the transfer of digital euro – assessed purely based on the relationships between transferor and transferee to their respective intermediaries – from an underlying contractual obligation between transferor and transferee. Such application of payment services law, however, is structurally incompatible where the digital euro is understood – as it is here – as a direct “entitlement” of its users,[204] instead of simplifying the legal integration of the digital euro complicating it further. For one, payment services law is tailored around the relevant monetary media being in personam claims, created and destroyed through respective bookings instead of being transferred. It thus does not contain any provisions which could aptly explain an actual transfer of direct entitlements.[205] Telling in this regard is particularly the exclusion of peer-to-peer transfers of cash from its scope.[206] This also illustrates that payment services law, for another, self-explanatorily applies only where relevant intermediaries are present. Whether this is the case depends entirely on the digital euro’s technological setup, where again the provision of cryptographic wallets instead of regular accounts,[207] but also the availability of offline digital euro, transferable without intermediaries,[208] cause complications. While it is certainly not out of the question for the lawmaker to stipulate payment services law as governing digital euro transfers, this would fail to provide a uniform, coherent framework for the digital euro more generally.[209]
A clarification regarding the applicability of payment services law is therefore urgently needed, with the proposal here being to view it essentially as a contractual supplement between user and intermediary – providing the user with additional protection,[210] for example, in cases of unauthorised transfers[211] –, to be separated from the proprietary aspects of the digital euro. This, lastly, also warrants a final clarification as concerns the concept of control, which has so far been construed purely on a factual basis without reference to agreements with third parties. From such perspective, control could accrue to intermediaries, for example where these provide custodial wallets, storing the relevant access requirements to effect changes in an official back-end, having clients thus access “their” assets solely through them and internal, front-end bookings.[212] As already maintained above regarding ownership, however, control should likewise remain with digital euro users.[213] The definition of the concept must thus be qualified to acknowledge that the existence of a contractual relationship with an intermediary does not interrupt a user’s direct relationship with their digital euro – a finding which, following the above, should be made clear more generally.
3.5 Additional Considerations: Protection and Enforcement
The contouring of property and control outlined above carries clear advantages for digital euro users. For one, it establishes that protectable legal interests in the digital euro exist, allowing owners to reassert their position against others – for example, through a rei vindicatio brought against an unauthorised person controlling their digital euro, or by securing protection in the insolvency of a debtor holding their digital euro. Protection is however not just granted as in rem remedies, but also under unjust enrichment and the law of delict. A full analysis of these nationally organised areas lies beyond this paper, but some general considerations are in order. These allow to test whether the digital euro can be integrated into private law based on its above contouring, and to point to areas requiring additional consideration – which, as will be shown, include especially the law of unjust enrichment and the mechanics of individual enforcement.
3.5.1 Property Protection
3.5.1.1 Rei Vindicatio
With the digital euro construed as property, and control as possession’s functional equivalent, a person controlling digital euro akin to a direct possessor can assert corresponding claims to protect their control.[214] In turn, where ownership and control diverge, a rei vindicatio as property law’s common remedy allows an owner to regain control.[215] In practice, arguably, this remedy will be rarely relevant: where one controls another’s digital euro, it is likely that they acquire original ownership through commingling, a third party acquires such derivatively in good faith, or ownership is simply lost through a conversion into cash or private money. For the former owner this is suboptimal, as they are relegated to claims for unjust enrichment or delict, losing their privileged position in case of insolvency of the debtor.[216]
One might thus consider extending the ability to revindicate to surrogates such as cash or other digital euro, which would, however, entail a considerable improvement in the position of digital euro owners compared to that of an owner of cash.[217] This advantage does not seem intended with the introduction of the digital euro, and does not necessarily follow from the construction of the digital euro as value itself. This solution does not seek to construe a new “value-ownership” for money, but rather attaches at the digital euro specifically to integrate it seamlessly into the existing legal landscape. A complete detachment of property law from individualised objects is thus neither goal nor result of the digital euro’s construction as property. Once a digital euro ceases to be individualisable, or to exist altogether, so does the possibility to revindicate.[218] In result, digital euro transactions will thus commonly get reversed outside of property law, which corresponds to the situation existing for cash.[219]
3.5.1.2 Law of Delict
Property protection of course extends beyond property law, and is also provided under the law of delict. While requirements differ, with some systems relying on a broad principle of neminem laedere,[220] and others restricting liability to certain cases or a numerus clausus of protected interests, absolute rights such as ownership are protected under both approaches.[221] The recognition of digital euro as property thus ensures its protection from infringements under the law of delict.[222] Its “reification” firstly avoids conceptual difficulties where systems generally limit liability to physical damage, restricting such for pure economic – i.e., monetary – losses,[223] as property damage can be sustained without physical damage.[224] For the digital euro, the most relevant infringement will likely be that of the removal from the owner’s influence by appropriation, unauthorised transfer to a third party, or commingling without/against the owners consent – as typical situations also for corporeal property.[225] Consider for this
Example 5
A has 10 digital euro in their account. B acquires A’s account credentials through hacking, and transfers the 10 digital euro directly to C – being in good faith as regards B’s authority to do so – in order to pay for a notebook.
Following what has been established, A cannot rely on remedies in rem, but on B’s liability under the law of delict. A special principle for the digital euro is thus not necessary within the latter, as its stipulation as property is sufficient to ensure integration into the relevant national laws.
3.5.1.3 Unjust Enrichment
The situation is more complicated for unjust enrichment, here encompassing two constellations. The first concerns situations where enrichment results from an act performed to fulfill an obligation which is or has become invalid or simply non-existent; the second such where enrichment followed an unjustified interference with another’s legal position.[226] For both, the general existence of an enrichment is a non-issue where money has been transferred,[227] and the construction of ownership and control become helpful to further clarify, where necessary,[228] which exact legal positions constitute the relevant enrichment.[229] The most relevant constellation for the digital euro is the first one – enrichment based on a defective or non-existent causa – seeing that abstract ownership transfers require restitutionary claims as a corrective mechanism.[230] Consider for this
Example 6
As in example 1 above, A (seller) and B (buyer) agree to the sale of a book for 10 digital euro. B then erroneously transfers 15 to A.
Assuming no special grounds invalidate the real agreement regarding the transfer of 15 digital euro, B could not recover the 5 mistakenly transferred without a claim for unjust enrichment of A. Since appropriate mechanisms for such situations are provided for, no special or separate stipulation for the digital euro is required in this regard.[231]
It is the second constellation – enrichment through interference – which is slightly more problematic. It generally covers cases such as dispossession, unauthorised transfers, or commingling,[232] which often also give rise to liability in delict. As example 5 illustrated with B’s hacking of A’s account, they are conceivable for the digital euro as well. Particularly with the involvement of a third party, amendments to the existing law prove necessary. For illustration, consider to example 5 the following.
Modification 1: B first transfers the digital euro into their account, which already contains 15 digital euro.
Modification 2: B transfers the digital euro to an unsuspecting C as a birthday gift.
Modification 3: B transfers the digital euro directly to C, who knows that they were obtained through a hack, but whose account already contains 15 digital euro.
The first modification is unproblematic: B acquired ownership through commingling, but as set out above, this does not block claims of A under the law of delict – due to the hacking – or the law of unjust enrichment – based on interference. The second modification, however, raises questions of transactional certainty and the negotiability of money.[233] It would run counter to the possibility to acquire bona fide if claims for unjust enrichment could be brought against the acquiring party, in this case C, which is why such are commonly precluded.[234] As bona fide acquisition here does not require a transfer “for value”, however, one might consider granting a claim against a third party acquiring gratuitously like C.[235] This is ultimately a policy choice, requiring clarity on what counts as “for value”,[236] but doing so would align the situation for the digital euro with the current status quo. [237]
Another policy decision is to be made regarding original acquisition where the commingling and the enriched party are not identical, as the case in the third modification. The enriched party may argue its enrichment to be justified based on a causa with the acting party. Unlike above, national laws diverge in the treatment of such cases.[238] A detailed discussion would go beyond the scope of this paper, but it does not seem absurd to afford protection for a (hypothetical) bona fide acquirer in these cases. Whether a uniform solution should be provided at the Union level certainly also depends on legal certainty afforded under private international law. After all, unlike the case for the digital euro’s legal nature and its acquisition modalities,[239] it does not seem particularly difficult to find the applicable law in cases of unjust enrichment, pointing reliably to a specific national law which either does, or does not provide, corresponding protection.
In general, no fundamental inconsistencies can be made out regarding the determination of the object to be restituted: if the specific medium can still be identified, it must be returned,[240] if this is not the case – as likely for the digital euro – restitution of a corresponding nominal value will be owed.[241] Further clarification, however, is needed regarding the position of intermediaries, particularly the applicability of payment services law and the potential impact a required authorisation thereunder has on the reversal of transactions.[242] Other than the few areas flagged, digital euro owners seem protected under the law of unjust enrichment with sufficient legal certainty without any further stipulations.
3.5.2 Individual and Collective Enforcement
Further clarifications may be needed for the digital euro in individual and collective enforcement, for which a few general observations can be made. First, the digital euro’s classification as property clarifies that it can form part of a debtor’s estate, but also that it can be re-claimed as such where ownership is retained by a creditor.[243] The latter is crucial with regard to insolvency of intermediaries, where digital euro, as envisioned, never become part of an insolvents estate.[244] Open questions, however, secondly remain with regard to individual enforcement, particularly on how the digital euro can be seized, both where monetary claims are enforced, but also where such for surrender of digital euro are in question.[245]
In both cases, the decisive factor will be that the digital euro is not tangible property in the traditional sense, but a system-specific, dematerialised monetary medium. As illustrated in German case law on cryptocurrencies, it may accordingly be preferable to enforce claims relating to the transfer of digital euro under those governing actions which can be performed by others (vertretbare Handlung).[246] In practice, this would allow intermediaries, through which digital euro are made accessible, to effect the surrendor of digital euro directly,[247] sparing creditors from depending on debtors’ cooperation,[248] and bypassing the two-step procedure of seizing corporeal property where a bailiff first seizes the property concerned and then transfers it to the claimant.[249]
Where digital euro are to be seized following the enforcement of general monetary claims, a similar approach is possible.[250] Simply applying the provisions governing movable property,[251] or – where existing – cash,[252] would require, mutatis mutandis, a change of control, which can only be effected by those possessing relevant access requirements. Seeing that control also relies on infrastructure access provided through intermediaries, however, these could again come to play a crucial role.[253] Where they hold technological access to accounts, they could transfer digital euro directly to the creditor, resembling the attachment of bank accounts.[254] The rules governing the latter, however, cannot be applied directly, as they are tailored to private money’s legal nature as a claim.[255] Still, adapting at least those provisions restricting a debtor’s power of disposal – or even allowing for direct crediting into the creditor’s account – would be expedient.[256] Of course, whether such involvement of intermediaries is possible depends entirely on the system’s technological design and the rights and obligations between involved actors. Accordingly, rules on individual enforcement must evolve in tandem with the ongoing development of the digital euro’s infrastructure.
3.6 Preliminary Conclusion
The above analysis offered a cautious but coherent integration of the digital euro, as “property”, into continental property law. Its findings translate to a minimal lex ferenda with stipulations concerning the legal object, acquisition, and loss, whilst exposing further areas to be addressed in the future. Taken together, the following principles accordingly emerge:
The legal object for property rights is each euro-cent as allocated within the underlying system, satisfying property law’s principle of specificity while remaining agnostic to the digital euro’s technical design.
Derivative acquisition of property rights takes place akin to the transfer of movable property, with a change of control replacing the traditional change in possession, ensuring recognition of the digital euro’s system-specificity.
The validity of proprietary transfers is insulated from the validity of an underlying causa, providing legal certainty for property transfers.
Control is defined factually following the definition proposed in the UNIDROIT Principles, Principle 6(1).
Bona fide acquisition is provided for, with the protection of transferees relying on apparent authority created through (the exercise of) control.
Where digital euro belonging to different owners are coming together in a single account, sole ownership is vested in the controlling account holder, with former owners referred to claims for unjust enrichment or delict.
The presence of intermediaries does not alter ownership and control accruing directly to digital euro users only. They are recognised as technological enablers, with rights and obligations stemming from payment services law leaving the proprietary regime unaffected.
These principles sufficiently contour the digital euro to be integrated into the broader private law framework pertaining property, its transfers, and its protection, allowing the digital euro to function as public money and securing legal certainty for its circulation with minimal legislative adjustment. As frequently mentioned throughout, none of these principles are, of course, without alternatives, and further clarification is needed pertaining the role of intermediaries within the digital euro system, both as regards their influence on digital euro transfers and for individual enforcement. Adjustments may likewise be considered, following the above principles, for the law of unjust enrichment concerning multi-party scenarios. Overall, however, the enquiry has shown that the digital euro’s private law integration can be achieved without inventing an entirely new legal framework, but by carefully contouring the digital euro as property and selectively amending existing law where its peculiar characteristics require this. By stipulating corresponding principles on the Union level, thus, a diverging legal treatment throughout the Member States can be avoided.[257]
4 A New Lex Monetae?
What remains to be tested is whether the EU has the necessary competence to enshrine the suggested principles in legislation.[258] Since the proposals fall within private law, i.e. the body of law governing the horizontal relationships between fundamentally equal individuals,[259] no specific competence attribution exists at the EU level.[260] Provisions often relied upon for private law, such as Article 169 TFEU on consumer protection, or Article 81 TFEU on judicial cooperation in civil matters, clearly cannot serve as a basis here. Invoking the more general Articles 114 or 115 TFEU, enabling harmonisation regarding the establishment and functioning of the internal market, seem more promising,[261] but doubts as to their suitability remain. Previous ECJ case law has established that divergences in national private law alone do not necessarily distort the internal market and the “equal competitive conditions”[262] to be had therein.[263] Whether this also applies to an entirely new legal object not fitting neatly within any Member States’ private law, but supposed to be circulating throughout the Eurozone at the same time, is open to question.
The reason why these provisions – like the “fallback” option of Article 352 TFEU[264] – are not explored in more detail lies in the nature of the digital euro and the character of the legislation proposed. As both concern a new medium of the single currency, reliance on a provision pertaining monetary law, or lex monetae, seems more appropriate. The most obvious provision in this regard is Article 133 TFEU,[265] empowering Parliament and Council to lay down the measures necessary for the use of the euro as the single currency. The current Regulation Proposal itself is already based on this competence, expressly stating that it is “necessary to establish the digital euro and to regulate its main characteristics as a measure of monetary law”.[266] The following subsections will therefore consider whether the proposals developed above can be implemented within this framework.
4.1 Private Law as Monetary Law
Monetary law traditionally concerns those legal rules dealing with the definition of legal tender, a corresponding currency unit, and monetary policy, thus areas of public law.[267] As all legislation reliant for its legitimacy on underlying sovereignty,[268] EU competence in these areas follows from the transfer of monetary sovereignty to the EU level with the introduction of the common currency.[269] Enshrined now in Article 3(1)(c) TFEU, this transfer has primarily affected the creation of broad executive competences in monetary policy,[270] laid down now in the second chapter of Title VIII (Economic and Monetary Policy) of the TFEU. Article 133 TFEU, replacing its predecessor Article 123(4)(3) TEC,[271] sits within this framework, and is commonly held to be the general legal basis for the EU’s monetary law.[272] The above proposals, clarifying how the digital euro functions in everyday transactions, concern the very core of its use as money and thus clearly relate to the “use” alluded to in the wording of Article 133 TFEU.[273] They do, however, pertain private law, clashing with the traditional understanding of monetary law as public law, in turn raising the question whether Article 133 TFEU is restricted to such limited understanding.
Nothing in the Treaties suggests such a restriction. Attributions of competences generally follow a functional orientation, not differentiating systematically between different pillars of law.[274] This holds true also for Article 133 TFEU,[275] containing no reference to either public or private law, nor even to monetary law as such. Its historical development likewise supports its broad reading.[276] Where the traditional, narrow understanding of “monetary law” is invoked to oppose such an interpretation,[277] this line of argumentation is little convincing. First, there is no commonly accepted definition of “monetary law” against which this narrow construction could be justified, particularly not within the EU treaties. Second, even those arguing for a narrow understanding themselves recognise inherent interdependencies between monetary and private law,[278] obscuring the boundaries between the two. Drawing a dividing line is hardly possible in any case, with currency relying equally on public and private law to function as intended. Within the broader framework providing order for, and instilling trust in market exchanges, the role of monetary law essentially lies in providing the constitutive framework for the currency itself,[279] defining the unit of account and its value as well as identifying the means of payment and its rules of supply.[280] The latter thereby entails the choice between the issuance of contractual claims or (tangible) objects to which property rights could attach,[281] thus already containing private law aspects. Thus, even in jurisdictions distinguishing clearly between public and private law as structural, vertical pillars within the legal system,[282] monetary law cuts horizontally through both as a functional body of law,[283] best described as a “hybrid branch of law”.[284]
This understanding of monetary law closes the conceptual circle to the functional attribution of EU competences, rendering the private-public law distinction irrelevant for Article 133 TFEU.[285] What is required for a measure to suitably fall within the provision’s ambit is rather its specific connection to the single currency.[286] Such connection is evident here. The proposals neither attempt to provide a general, harmonised private law of digital assets, nor do they deal with questions lying at the periphery of the single currency. Instead, they are tailored to a new monetary medium, denoted in the single currency’s unit, supposed to function as an official means of payment throughout the Eurozone. This medium is not simply issued – integrating itself frictionlessly within existing private law – but designed, from the bottom up, in an entirely “tailor-made” [287] manner,[288] with its private law implications being constitutive to its design. The proposed principles seek to ensure its function as a means of payment, inextricably tied to the single currency as such, with Article 133 TFEU thus offering, at first glance, a suitable legal basis for corresponding legislation.
4.2 Monetary Law in a Fragmented Union
The precise scope of Article 133 TFEU and measures to be suitably subsumed thereunder require some further contouring, however. This follows from the link between legislative competence and sovereignty, divided both vertically between the EU and its Member States as well as horizontally among EU institutions. While monetary sovereignty passed to the Union on an exclusive basis with respect to euro monetary policy,[289] the boundaries of this transfer have not been clearly defined.[290] The issues arising therewith are twofold. Firstly, the EU’s “monetary constitution”[291] splits the exercise of monetary sovereignty at the Union level notably between the ECB and the co-legislator. Article 133 TFEU highlights the potential for conflict by granting competence to the co-legislator “without prejudice to the powers of the European Central Bank”. Second, systematic frictions arise regarding the Member States. As Article 133 TFEU is situated within the chapter on monetary policy, and thus an exclusive EU competence following Article 3(1)(c) TFEU, Member States retain no autonomous competences in the areas covered, Article 2(1) TFEU, and subsidiarity under Article 5(3) TEU does not apply. For the proposed legislation, this seems at odds with the absence of a general EU competence in private law, and with Member State’s insistence on retained authority here.[292] These issues shall be addressed in turn, starting with the latter.
4.2.1 Retained Member States’ Competence
In relation to the Member States, Article 345 TFEU constitutes the main source of concern with respect to an EU competence. The articles states that the Treaties shall in no way prejudice the rules in Member States governing the system of property ownership, raising two distinct questions in the present case. First, whether this provision bars any Union-level advance into the realm of property law, and second, should this not be the case, how the provision relates to Article 133 TFEU.
The first issue can be addressed in a rather straightforward manner. Article 345 TFEU has sometimes been interpreted as excluding outright an EU competence in property law, preventing any harmonisation or unification attempts within this area of law.[293] This presupposes that the “system of property ownership” also encompasses the private law right of ownership itself, and that “the Treaties” referred to include also secondary EU law.[294] Inquiries into the historical development of the provision instead suggest a more restricted scope, relating to the economic policy issue regarding privatisation or nationalisation of “undertakings” or “enterprises”, to which drafts of Article 345 TFEU’s predecessor versions frequently referred.[295] These references, however, were scrapped without clear reasoning;[296] inferring that they were simply deemed redundant – thus suggesting Article 345 TFEU still be read with the restriction in mind – is hence not necessarily possible.[297]
A systematic and linguistic comparison of Article 345 TFEU, however, suggests that the ambiguous term prejudice within Article 345 TFEU should be understood in a narrow sense.[298] Unlike Article 346 TFEU, likewise restricting the effect of the Treaties using the stronger preclude, Article 345 TFEU only employs the weaker prejudice.[299] It is accordingly to be understood as ensuring a neutral stance of the Treaties towards the national organisation of the system of property ownership, rather than stipulating an area entirely free from EU-impact. This reading aligns with ECJ case law, where dealing with property rights themselves – and not business ownership or state aid – it was established that Article 345 TFEU does not result in an exclusive sphere of Member State competence pertaining legislation in the matter.[300] It was clarified in particular that previous distinctions between the exercise of property rights, which EU law could impact, and the existence of property rights, generally left solely to the Member States,[301] does not carry forward into the question of EU competence to positively harmonise respective legal areas.[302] For the present case, thus, establishing a new monetary medium as a new object of property rights, contouring its behaviour through property law principles, is not generally precluded through Article 345 TFEU.[303]
The remaining issue concerns how far legislation under Article 133 TFEU may go. Concerns arise from recent ECJ case law holding that the EU’s exclusive competence as pertains monetary policy, and thus also monetary law, does not include the competences to lay down the general modalities for the fulfillment of monetary obligations, as established i.a. through private law.[304] On this basis, it is sometimes concluded that the EU may only determine the general legal nature of the digital euro but not set further detailed rules, e.g., on its transfer.[305] This conclusion, however, relies heavily on the premise that Article 345 TFEU bars EU legislative action in the area of property law,[306] which – as has been shown – is not the case. The ECJ itself clarified that monetary policy, as an exclusive EU competence, is not limited to operational implementation, but includes “a regulatory dimension intended to guarantee the status of the euro as the single currency”,[307] preventing it from being “understood differently and governed by different rules in the Member States whose currency is the euro”.[308] This, however, is precisely the danger for a digital euro governed differently throughout Member States, so a restriction cannot be implied from the invoked case law – which in any case concerned only the obligation, and national deviations, to accept euro cash as legal tender.
This applies all the more as the proposed legislation creates a new object of property rights, with this object intrinsically connected to its characteristic as an official means of payment, and thus monetary sovereignty accruing to the EU. For the digital euro to function as intended, legal certainty is crucial, which cannot be achieved merely by declaring it “property” or that in rem rights attach.[309] Unlike cash or private money, aptly governed by legal regimes sufficiently familiar with such objects, the digital euro is a novel construct built on entirely novel infrastructures, requiring stipulations what exactly is meant or effected by its classification as property,[310] and what role intermediaries and technological registers play regarding the creation, transfer, and destruction of property rights.[311] Global experience shows that jurisdictions continue to struggle with the private law ramifications of digital assets.[312]Absent clarifying stipulations, thus, Member States can inevitably diverge in transposing the digital euro into their private law,[313] inhibiting uniformity, endangering trust in the European CBDC and its functioning, ultimately undermining the singleness of the euro against which the EU’s legislative competence is intended to insure. To ensure the (digital) euro’s proper functioning, legislation under Article 133 TFEU can and must therefore extend beyond a general classification of the digital euro as property, and include the details set out above.[314]
4.2.2 The Role of the ECB
Article 133 TFEU is thus a suitable legal basis for the suggested legislation, to be adopted after consultation of the ECB and without prejudice to the latter’s powers. At the intersection between co-legislator and ECB, conflicts thus result. For the digital euro, these arise once again from its dual nature as both a payment asset and a payment system. Unlike a re-design of euro banknotes, falling squarely under the ECB’s mandate,[315] the digital euro requires both technological infrastructures and a comprehensive legal “enabling framework”[316] to be implemented. In this context, the Treaties seem to initially provide a clear division of competences, within the Union’s exclusive competence over monetary policy (Währungspolitik) differentiation between, firstly, the operative ECB competence to conduct monetary policy narrowly construed as Geldpolitik [317] – managing supply and demand on the money market to ensure a stable monetary value[318] –, Article 127(2) first indent TFEU, secondly the ECB’s competences regarding technical aspects of public money issuance, Article 128 TFEU,[319] and thirdly the co-legislator’s competences regarding measures aiming to ensure the singleness of the euro in terms of legal design, Article 133 TFEU.[320] At first glance, the ECB’s areas of competence are thus unaffected where the digital euro is contoured more closely as a private law legal object.
On closer inspection, however, interdependencies arise. For one, issuance is inextricably tied to legal design, as illustrated in the discussion surrounding the legal basis for the digital euro's issuance. Here, whether Article 128(1) TFEU, referring only to physical banknotes, can be relied upon is said to depend on the digital euro’s cash-likeness,[321] entailing that it must be transferable through direct entitlements exchanged directly between users, without reliance on intermediaries[322] – enabled of course with the proposed property construction. For another, the ECB’s task concerning payment systems under Article 127(2) fourth indent TFEU, specified in Article 132 TFEU and Article 22 of the ESCB Statute,[323] covers not only the operation of proprietary systems, but also a regulatory dimension to ensure efficiency and soundness of payment systems more generally,[324] including both public and private law aspects.[325] If the digital euro is accordingly understood as such payment system,[326] which is not entirely unlikely given the term’s broad understanding,[327] the ECB’s competence here may overlap with that of the co-legislator.
Trying to delineate precise competences hence reveals structural circularity. A legal contouring of the digital euro is redundant without a legal basis for its issuance, yet the legal basis for its issuance itself depends also on its legal design, with the suitable competence for said legal design in turn depending on decisions pertaining the digital euro’s legal and technological implementation. To escape this circularity, it is sometimes suggested to grant primacy to the co-legislator on grounds of democratic legitimacy, especially where the issuance of the digital euro is concerned.[328] For the legislation proposed here, the ECB would hence be comprehensively bound, entailing that technology must follow law.[329] EU law itself, however, does not establish such primacy in the present case. While the ECB is not insulated from secondary EU law, such must rest on a proper legal basis,[330] determined by a centre-of-gravity test rather than concerns for democratic legitimacy.[331] Due to the interdependence of law and technology, determining this centre of gravity is difficult. A realistic solution to this issue is thus a joint approach: combining Article 133 TFEU with ECB competences,[332] clarifying the digital euro as a legal object while ensuring its technological feasibility. At the very least, legislation under Article 133 TFEU must be developed with an “unprecedented level of coordination”[333] between the co-legislator and the ECB, as legislation developed without consideration of the technological setup is superfluous at best, while the functionality of this setup in turn relies on a proper “enabling framework”.[334]
4.3 Preliminary Conclusion
The EU co-legislator is competent to define the digital euro as property and determine the consequences of this classification based on Article 133 TFEU. This competence is not limited by Article 345 TFEU, but the intended legislation will require, at the very least, close coordination with the ECB.
5 Overall Conclusion and Outlook
A recent monograph on the legal theory of money notes: “Money is presumed to be a form of property […] but there is no discussion about the peculiar properties of this property”.[335] This aptly captures the situation for the digital euro. As public money meant to reflect a direct legal entitlement of its users, suggesting its classification as property, its further legal integration remains unclear. This paper sought to address this gap by illustrating how the digital euro’s “peculiar properties” may be coherently outlined at the EU level.
The starting point for this endeavour was to define the digital euro as a legal object, freeing the concept of property from requirements of corporeality or physicality and allowing the essence of money – economic value – to become the relevant object. This object, essentially being a function, grounded in its fungible, generic nature representing purely abstract value, was then fit into existing property law, focussing on the individuality and specificity of objects, by tying it back to the underlying technology. This established the European CBDC as a system-specific asset, with consequences for the creation, transfer, and destruction of property rights. Principles proposed here addressed these by establishing control as the equivalent to direct possession, applying an abstract transfer system, and reflecting the digital euro’s system-specificity within the rules for commingling and bona fide acquisition. This contours the digital euro sufficiently to be encompassed within existing regimes, ensuring a synchronised legal treatment of the single currency’s analogue and digital media. In addition, gaps in the current legislative process and further areas of concern have been uncovered, particularly with respect to the role of intermediaries active within the digital euro system.
What has been illustrated, thus, is that the introduction of a digital euro presents not only a technological, but also a significant legal challenge. Regarding the digital euro’s status as property, the EU possesses the necessary competences to face this challenge under Article 133 TFEU and should seize the opportunity to provide legal certainty. The principles outlined in this paper correspondingly offer a foundational structure which could be embedded within a future digital euro Regulation, allowing the Member States to integrate the digital euro as a new, harmonised legal object more broadly into their respective legal systems.
Acknowledgements
This article is part of a cumulative PhD project, supported by a scholarship of the University of Hamburg, which also provided the funding for OA publishing.
© 2025 the author(s), published by De Gruyter, Berlin/Boston
This work is licensed under the Creative Commons Attribution 4.0 International License.
Articles in the same Issue
- Frontmatter
- Editorial
- Property as Oligarchic Power, Competition Law, and the Future of Democracy
- Articles
- Value as Property: Private Law Integration of a Digital Currency
- Time-Sharing of Immovable Property Between EU and Albanian Law: Jurisdiction, Applicable Law, and Consumer Protection in Case-Law
- Possession and Control in the Collateral Directive as English Law concepts?
Articles in the same Issue
- Frontmatter
- Editorial
- Property as Oligarchic Power, Competition Law, and the Future of Democracy
- Articles
- Value as Property: Private Law Integration of a Digital Currency
- Time-Sharing of Immovable Property Between EU and Albanian Law: Jurisdiction, Applicable Law, and Consumer Protection in Case-Law
- Possession and Control in the Collateral Directive as English Law concepts?
