Should Denmark issue e-kroner?

After Sweden, Australia, NZ, we also have Denmark chipping into the debate.

Denmak Central bank looks at the issue whether they should issue a digital currency or e-kroner?

In this short research summary the central bank rejects the idea saying it will lead to financial instability:

Danmarks Nationalbank’s core tasks are to maintain a secure payment system, support financial stability, and ensure stable prices via monetary and exchange-rate policy. Danmarks Nationalbank handles these tasks by, among other things, serving as banker to the commercial banks. Issuing central bank digital currency would make Danmarks Nationalbank a retail bank for households and businesses and would fundamentally change Danmarks Nationalbank’s role. It is not part of Danmarks Nationalbank’s objective to compete with the commercial banks by providing deposit accounts and digital payment solutions to households and businesses. 

Danmarks Nationalbank assesses that central bank digital currency might also jeopardise the stability of the financial system. A bank run, in which many households and businesses withdraw their bank deposits at the same time, could be far more serious if there was an option to transfer these deposits to an account at Danmarks Nationalbank within a few seconds, instead of having the deposits paid out in cash. The banks might then face an acute and significant funding need, leading to financial instability.

Issuing central bank digital currency could also present significant legal and administrative challenges for Danmarks Nationalbank, without any clear benefits for society, e.g. in relation to the anonymity of payments and access for non-residents. With regard to monetary policy there are no potential benefits from introducing central bank digital currency in this respect either.  

Interesting. No other central bank which has discussed these ideas has spoken about the financial instability bit.

The entire publication is worth reading which has more details…


2 Responses to “Should Denmark issue e-kroner?”

  1. Should Denmark issue e-kroner? | Mostly Economics | Me Stock Broker Says:

    […] papers, Central Banks / Monetary Policy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own […]

  2. Israel planning its own e-sheckel… | Me Stock Broker Says:

    […] banks like Sweden are thinking of issuing their own digital currency like whereas some others like Denmark and Finland have expressed reservations against the […]

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