Sweden moves closer to issuing e-krona…

In Sweden, physical cash continues to decline and this has led to Swedes thinking of introducing a cash law.

Parallely, they are now moving closer to issuing a central bank digital currency:

The Riksbank has provided the general public with money for 350 years, but as the use of cash is continuing to decline in Sweden, we need to think in new ways. In the future, cash may be used to such a limited extent that it is difficult to pay with it. In response to this, the Riksbank started a project in the spring of 2017 to examine the scope for the Riksbank to issue a central bank digital currency (CBDC), a so-called “e-krona”.

An e-krona could ensure that the general public will still have access to a state-guaranteed means of payment. Adopting a position on whether Sweden should introduce an e-krona will take time. But at the same time, the analysis work needs to continue to increase the Riksbank’s knowledge of the consequences of an e-krona and technological solutions need to be developed and tested.

They have issued a new report which examines e-krona:

The e‐krona could become a modern krona in electronic form as a complement to physical cash. The public could then continue to have general access to central bank money. The e-krona could also strengthening preparedness, as the private market cannot be expected to take all the responsibility for ensuring that payments function in crisis situations. In serious crises, when private payment systems may fail, an e‐krona could work as an alternative system and thereby increase stability in the payment system as a whole. The e‐krona could hence help to promote a safe and efficient payment system.

The e‐krona could offer a competitively neutral infrastructure which payment service providers can join if they wish to offer services to households and companies. This could increase competition, benefit innovation and possibly slightly reduce the fees charged to the general public.


E‐krona can be described as Swedish krona that can either be held in an account at the Riksbank (account‐based) or be stored locally, for example on a card or in a mobile phone app (value‐based). 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.

This will require banks to rely more on wholesale funding:

How monetary policy and financial stability will be affected by the e‐krona depends on how large demand for an e‐krona will be. The demand depends in turn on how the e‐krona is designed. The conclusion in the report is that if the e‐krona were to be in substantial demand and be widely available, it would be beneficial to control its demand. Interest rate could in this case be one among other possible tools to limit possible negative effects on the efficiency of monetary policy and financial stability.

If demand were to be small, the effects on the financial system would be minor. Banks might perhaps receive slightly fewer deposits and therefore have to obtain slightly more wholesale funding. In times of financial unease, when the public may wish to withdraw large amounts from weak banks, the e‐krona could make the run from the banking system to stateguaranteed money both easier and quicker than a traditional run from the banking system to cash. However, the Riksbank already has tools to be able to cope with such situations if they were thought to pose risks to financial stability.



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