Merchants within the euro area could be obliged to accept a digital euro if it is deemed to be legal tender, according to a paper set to be put before finance ministers later Monday and seen by CoinDesk.

Giving the central bank digital currency (CBDC) the same status as banknotes and coins would mean payments legally discharge obligations to pay, and with mandatory acceptance at full face value, the paper said.

Legal tender status “would imply a legal obligation for (certain) payees to accept payments in digital euro … thereby increasing its network effects, and potentially affecting its distribution,” said the document, drafted by the secretariat of the Eurogroup, which brings together finance ministers from the 20-nation currency area, ahead of a monthly meeting.

The paper also asks ministers "whether exemptions should be considered to ensure proportional application ... balancing the principles of contractual freedom and mandatory acceptance."

(By Jack Schickler)