ECB pushes back against ‘no cash’ policies as Malta clings to physical currency

As Europe continues its digital shift in payments, the European Central Bank (ECB) is calling for stronger protections for cash, warning that shops refusing euro banknotes and coins risk undermining legal tender laws and excluding vulnerable groups from the economy.

Piero Cipollone, an Italian Economist and Member of the ECB’s Executive Board, said that displaying “no cash” signs or refusing cash outright is “undesirable” and fundamentally inconsistent with the legal tender status of euro cash, as clarified by the Court of Justice of the European Union (CJEU). “Cash is the default means of payment and must be accepted unless both parties freely agree otherwise,” he stated in a recent blog post.

The remarks are timely, as businesses across Europe – including a growing number in Malta – increasingly embrace card-only payment models. Though still rare on the islands, card-only shops, bars and restaurants have appeared in recent years, leading to confusion over whether such practices are legally valid. A 2024 article by BusinessNow.mt highlighted this legal grey area, with the Central Bank of Malta confirming that current laws do not explicitly prohibit businesses from refusing cash – though that could soon change.

Malta’s attachment to cash remains strong

Despite the growing adoption of digital payments in northern European countries like Sweden and the Netherlands, cash remains deeply entrenched in Malta’s payment culture.

According to the Central Bank of Malta, 85 per cent of respondents in a recent study said they always carry cash, and most daily transactions are still carried out using physical currency – a stark contrast to the sub-20 per cent figure reported in countries driving the move toward cashless societies.

Malta’s relatively small size, close-knit communities, and cautious approach to digital infrastructure all contribute to this enduring preference. The digital shift is happening, particularly among younger consumers using contactless cards and mobile wallets, but it is slow compared to EU peers.

Mr Cipollone acknowledged this diversity in his blog post, stressing that “a one-size-fits-all approach may not be suitable” and that national particularities must be considered when setting rules around access to cash. However, he also stressed that access must be preserved: “The local provision of cash services by banks and comprehensive ATM networks remain indispensable.”

Towards mandatory cash acceptance?

To address growing inconsistencies, the European Commission proposed a new Legal Tender of Cash Regulation in June 2023 as part of its broader Single Currency Package. If adopted, this would enshrine in law the obligation for shops and public institutions across the eurozone to accept cash, giving teeth to what is currently more guidance than enforceable policy.

The ECB strongly supports the regulation and is working with national central banks to define “common indicators” for access to cash, which could influence the number and distribution of ATMs, particularly in rural and underserved areas.

Retailers sometimes cite operational difficulties, such as lack of change or safety concerns, as reasons for refusing cash – and current European Commission guidance does allow limited exemptions in such cases. But Mr Cipollone argues these cannot become the norm, especially when public services are involved. “Public authorities should preserve effective cash payment options,” he said, warning against excluding citizens who rely on cash, especially during crises when digital systems may fail.

Cash in crises, and its future in a digital world

Indeed, the role of cash during emergencies was a recurring theme in Mr Cipollone’s message. He highlighted that demand for cash surged during major crises, including the 2008 financial meltdown and the COVID-19 pandemic. Cash, he said, is “indispensable” when digital systems are disrupted by power outages or cyberattacks – most recently evidenced by the 2025 blackout in the Iberian Peninsula.

At the same time, the ECB is preparing for the future. Work is underway to redesign euro banknotes with enhanced security and modern visuals, and plans for a digital euro are progressing in tandem. Mr Cipollone emphasised that the digital euro will complement, not replace, physical cash – effectively becoming its “digital expression.”

“Europeans will benefit from a broader range of payment methods,” he wrote. “They will be able to use central bank money for nearly all types of payments, including online transactions, and they will benefit from enhanced safety, security, efficiency, privacy and inclusivity.”

Malta’s balancing act

For Malta, the ECB’s strong stance on preserving cash resonates deeply. While efforts to encourage digital payments are accelerating – driven by the government’s push to modernise the economy and curb the shadow economy – any move to phase out cash would likely face cultural resistance. Businesses, particularly small and micro enterprises, often find cash simpler and cheaper than installing card systems.

As the EU moves towards harmonising payment standards, Malta’s challenge will be to balance tradition with innovation. Digitalisation offers long-term advantages in convenience and efficiency, but the ECB’s latest comments make it clear: Cash remains king – for now, and for the foreseeable future.