A digital complement to cash
Published: 7 November 2019
For 350 years, Swedish society has relied on the Riksbank to provide the country with money in the shape of Swedish krona. However, for some time, Sweden has gained attention as having the greatest and fastest decline in cash worldwide. This development is in line with the perception of Sweden as one of the countries in which the digitalisation of society as a whole has come furthest. Even if cash does not completely disappear, a situation in which cash is no longer generally accepted as a means of payment would be tantamount to a cashless society. The Riksbank has expressed concern over this development in a consultation response to the Riksbank inquiry, in speeches and in debate articles.
Technological advances and digitalisation of payments have brought to a head the question of the future role of the state in the payment market. If nothing is done, this development will very likely lead to the general public no longer having access to state-issued money, Riksbank money, which is the most secure form of money existing. This development has also resulted in certain groups in society, who are unable to use digital services for various reasons, finding it increasingly difficult to make payments, a new kind of financial exclusion.
The Riksbank thus needs to consider whether cash needs to be modernised to fit into the digital economy. As part of 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), an “e-krona”.
An e-krona would give the general public access to a digital complement to cash, where the state would guarantee the value of the money. At present, only the banks and other participants in RIX have access to the Riksbank’s digital currency. All other digital money in society is issued by the commercial banks.
By definition, an e-krona would also be a digital form of payment, but it could be designed with the aim of including all groups in society. Easily accessible, simple and user-friendly versions could be developed for those who currently have difficulty with digital technology.
In addition, an e-krona could form its own separate system that would strengthen the resilience of the payment system. In the event of serious shocks to the systems of the banks or card companies, an e-krona could be an alternative form of payment. An e-krona would thus fulfil the same task that cash fulfilled so well in the analogue era – providing a state payment alternative that is available to all and that complements the range of private services.
In the e-krona project, the Riksbank has had a dialogue with several national and international agents to hear their views on an e-krona, has looked at proposals for suitable technology and has examined the legal issues that need to be dealt with to ensure the Riksbank has a clear mandate to issue an e-krona.
Continued dialogue with the general public, payment market participants and other central agencies will be important. No decisions have been taken to issue or not to issue an e-krona, but by continuing to examine the possibilities, the Riksbank is preparing a possible way forward towards meeting a new digital payment market.