Ingves: Do we need an e-krona?
“The Riksbank is investigating whether an e-krona could be the solution to provide the general public with continued access to central bank money even when Sweden has stopped using cash.” This comment was made by Stefan Ingves during his speech at Swedish House of Finance on Friday. The need for a digital form of cash is currently the subject of lively debate and analysis in the central bank world.
In Sweden, we are approaching the issue from what is a unique situation in an international perspective, namely that demand for banknotes and coins is declining rapidly. Since 2008, the demand for cash has declined by around 40 per cent. The rapid decline in the use of cash in Sweden is part of a broad digitalisation trend that affects society as a whole. The trend is global – an increasing number of people want to use digital solutions to pay and fewer want to use paper-based payments, including banknotes and coins. It is probably therefore only a question of time before more countries find themselves in the same situation as we have in Sweden today.
Central banks were established once upon a time to provide the general public with money in the form of banknotes and coins that did not entail any credit risk and that inspired confidence – what was known as central bank money. Gradually, the central banks were also given the responsibility for creating a uniform standard for banknotes. In Sweden, this took place in 1904, when the Riksbank was given a monopoly on issuing banknotes and commercial banks stopped issuing them.
“It is scarcely surprising that a central bank in the Riksbank's situation needs to at least investigate whether the arguments that have historically been so important – that the central bank shall provide the general public with assets and means of payment free of credit risk – no longer have such great significance. The questions that led to the Riksbank's monopoly on issuing banknotes in 1904 are coming up again,” said Mr Ingves.