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Sweden’s central bank to test digital currency

Riksbank e-krona initiative follows government plan for a cashless society by 2030

This article can also be found in the Premium Editorial Download: CW Nordics: CW Nordics: Sweden to test e-krona and plans cashless society

Sweden’s vision of a cashless society has gained traction after the Riksbank (central bank) rolled out plans to test a digital currency, the e-krona.

The decline in the use of cash and cash-based transactions in Sweden is driving the Riksbank initiative.

In 2016, the ruling Social Democrats presented a plan to make Sweden the world’s first cashless society by 2030. This specific target date was broadly supported by opposition party leaders subject to the government reaching a consensus agreement on the plan with trade unions, banks and the country’s leading national consumer groups.

The Riksbank’s action reflects a visible undercurrent of support for the government’s cashless society ambition.

Sweden’s march towards a heavily digitised economy was highlighted on October 1, when the global furniture giant Ikea rolled out its first cash-free retail store in Valbo. The pilot store will only accept digital payments in the form of bank cards and smartphone-based pay solutions.

The e-krona initiative is technically being run as a pilot project to test the suitability of different digital currencies. The central bank has not taken a firm decision about whether a national e-krona launch might be a short- or long-term possibility.

The central bank will use the project to ascertain how an e-krona could be best employed to provide the general public with access to a state-guaranteed means of payment.

Read more about going cashless in the Nordic region

  • Selected types of Danish retailer could soon be permitted to turn away customers who can’t pay electronically.
  • Swedish consumers are rapidly moving away from banknotes and coins in favour of digital payments.
  • The use of cash continues to increase in the world’s economies apart from in Nordic countries Norway and Sweden.

A decision as to whether the central bank will introduce the e-krona to replace legal tender notes and coins will take some time, said Eva Julin, the Riksbank's e-krona project manager.

“We will need to run trials, then test and prove various solutions,” said Julin. “Any technological solutions we develop and test must have the capacity to be viable and practical. This is a learning process for us, but one that may lead to useable digital currency.” 

Any concrete plans to launch an e-krona would first require legislative amendments to the Swedish Central Bank Act (Sveriges Riksbank Act). The existing act would need to be expanded to enable the central bank to issue an account-based e-krona. An amended act would also be required to accommodate the issuing of a value-based e-krona without interest and with traceable transactions.

Sweden’s banking and commercial sectors are supportive of Riksbank’s e-krona vision, albeit somewhat sceptical that the government can meet its 2030 cash-free target date. Sweden’s banks are universally supportive of the plan. Most bank branches in Sweden no longer provide an over-the-counter service for cash-based transactions to customers.

The Riksbank has recorded a sharp increase in mobile, card and online payments in the last eight years. The proportion of cash transactions in the retail sector has dropped from 40% in 2010 to 15% in 2017. Around 85% of consumers aged 16 to 74 years in Sweden conducted their banking online in 2017. This compares to a European average of 51%.

However, not everyone embraces a rapid transition to a digital currency. Interest groups representing older citizens, such as the Swedish National Pensioners' Organisation (Pensionärernas Riksorganisation), are demanding a national debate and possible referendum to decide the issue. The lobbying group has 350,000 members.

“The right to use cash must remain a right in Sweden so long as the law applies,” said Christina Tallberg, the SPNO’s chairman. “People must continue to have this option available to them. We are not against a cash-free society, we just want it to proceed at a pace everybody can feel comfortable with.”

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