Why did central banks get a monopoly on banknotes?

Trying to catch up with unread stuff.

Came across this interesting paper by Gabriel Söderberg, written in 2018. The paper is mainly on why Riksbank managed to get a monopoly on banknotes but also discusses Bank of England and Federal Reserve case as well.

It is not self-evident that only central banks can issue cash. Historically, private banks in Sweden and elsewhere have issued their own banknotes. The
decision that only the central bank of a country should be able to issue cash, a so-called banknote monopoly, was taken in most countries in the 19th and
early 20th centuries. Today, the situation has changed, and in Sweden, cash is used to a very small extent. This raises the issue of the Riksbank’s role as issuer
of means of payment and its relationship to private banks in the payment system. This article examines the Riksbank’s banknote monopoly, which was
introduced in 1904.

It concludes that the banknote monopoly should be seen as a political decision to clearly delineate the issue of means of payment from
commercial operations, secure the general public’s access to risk-free means of payment and make the Riksbank’s position strong enough to guarantee the
stability of the money and payment system.

 

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