A continued sharp fall in the use of cash for retail payments in Sweden has led the country’s central bank to consider proposals for an ‘e-krona’, which local press have reported could be introduced as soon as late 2018.
The Riksbank, which claims to be Europe’s oldest central bank, founded in 1668, stated that cash payments in the retail sector fell from 40% in 2010 to just 15% in 2016.
“If this trend continues, Sweden may, in the not-too-distant future, become a society in which it is no longer possible to pay using cash. This development is unique from an international perspective,” the central bank said in its outline of the need to consider introducing a digital currency.
Currently, the electronic money and electronic payment methods used in the economy are run by private sector companies, with significant concentration in terms of the number of services providers, such as payment services and infrastructure providers. The Riksbank said it is concerned about competition being harmed in the long run by such concentration in the market, and the risks this could pose to Swedish society overall.
“The development towards an almost cashless society also entail households having little opportunity to save and pay with risk-free central bank money and this could lead to the payment system becoming sensitive to shocks,” it warned.
This has led the bank to consider an ‘e-krona’ as an alternative to cash, and whether its introduction would counteract the perceived problems in the payment market in the future. If so, it would answer a number of the questions the bank currently has around systemic stability as payments increasingly go digital.
No decision has been made on issuing an e-krona, according to the Riksbank’s own statement, although it has been reported by Dagens Industri that it could happen as soon as December 2018, alongside an interview with Eva Julin, project manager for the e-krona at the bank.
The bank has, however, outlined its expectations around the characteristics of such a currency:
- The e-krona is primarily intended for smaller payments between consumers, companies and authorities;
- The e-krona constitutes a direct claim on the Riksbank, is specified in Swedish kronor and can be held by the general public, financial institutions and companies. It is an asset in real time, 24 hours a day, 365 days a year;
- The e-krona does not accrue any interest, but should have a built-in function to make it possible to accrue interest at a later point;
- E-krona accounts should be combined with a value-based solution that makes it possible to pay small amounts offline and that increases availability for groups unwilling or unable to hold an e-krona account;
- The Riksbank will provide the basic functions for the e-krona, but is investigating the possibility of using the existing digital infrastructure and invites external actors to propose how applications used by the general public should be designed.
The bank said that by publishing its thoughts on the e-krona, it wanted to start a discussion with “authorities, politicians, financial markets and technology suppliers” as to how this project should develop.