Why The Swedish Central Bank Sees The Need For Digital Currency


Sveriges Riksbank, the central bank of Sweden, is looking to issue a central bank digital currency (CBDC) called the e‐krona.

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The Riksbank set up an e-krona project to explore why and when Sweden should introduce an e‐krona, the electronic form of the Swedish kronor. According to a report issued by the e-krona project’s team, central bank digital currencies are a relatively unexplored area that is currently being analyzed by several central banks around the world. The report suggests the use of banknotes and coins is declining in the country and cash is going to own a very small share in future payment methods.

Why the Swedish Central Bank is Thinking About Digital Currency

As mentioned in the e-krona project report, the use of banknotes and coins is declining in Sweden. At the same time, technological advances in electronic money and payment methods are proceeding rapidly. Therefore, the Riksbank is investigating whether Swedish kronor need to be made available in electronic form.

According to the Riksbank’s survey from 2018, only 13% of people paid for their most recent purchases in cash. The corresponding figure for 2010 was 39%. As more consumers turn to electronic payments, it is likely to no longer be profitable for retailers to accept cash.

“If the trend continues, Sweden may find itself in a few years’ time in a position where cash is no longer generally accepted by households and retailers,” according to central bank.

E-Currency Makes State Relevant Player in Payment Market

In the report, the Riksbank said that while the state has provided the general public with cash to use for payments for some time, today’s digital payment market is creating a situation where all means of payment accessible to the general public are issued and controlled by private agents.

“If the state, via the central bank, does not have any payment services to offer as an alternative to the strongly concentrated private payment market, it may lead to a decline in competitiveness and a less stable payment system, as well as make it difficult for certain groups to make payments. Ultimately, it may also risk eroding basic trust in the Swedish monetary system. Some of these problems could be neutralized or mitigated by an e‐krona,” according to the central bank’s report.

E‐krona will be a digital form of the Swedish kronor that can either be held in an account at the Riksbank or be stored locally, for example on a card or in a mobile phone app.

“Both types of e‐krona assume that there is an underlying register so that it is possible to record transactions and safeguard who is the rightful owner of the digital krona. This means that digital transactions with e‐krona will be traceable,” according to Riksbank.

E‐krona could be offered in the same way as cash is today and be widely available to households and companies – regardless of domicile. However, an application to open an e‐krona account may need to be assessed based on established rules and conditions just as when a bank account is opened at a private bank, according to Riksbank.

The e-krona project’s team proposes that the Riksbank should launch a pilot program to develop one or more possible technical solutions for an e‐krona concept.

In addition, the project suggests drawing up proposals for legislative amendments that are needed to clarify the bank’s mandate and an e‐krona’s legal standing.

The Riksbank has yet to make a decision on issuing an e-krona. A downside of the e-krona is that all transaction will be able to be monitored by the state, affecting the level of freedom in the country by effectively surveying every transaction by private individuals.

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