Sweden's Central Bank Revives E-Krona Debate as Stablecoins and Digital Euro Loom
Key Takeaways
- •Sveriges Riksbank has urged Swedish lawmakers to begin preparing legislation for a possible digital krona, a process it estimates would take at least five years.
- •The central bank warned that stablecoins pegged to foreign currencies and the EU's planned digital euro could reduce demand for the krona, presenting little near-term risk but a persistent long-term threat.
- •A 2023 government inquiry concluded there was insufficient need for an e-krona, but the Riksbank says shifts in how people pay and growing security risks may warrant a fresh review.
- •Riksbank data cited in its letter to parliament's Committee on Finance only 5% of surveyed Swedes used cash for their most recent purchase, and a decline in krona use could complicate monetary policy and threaten financial stability.
- •The Riksbank views an e-krona as a backup payment option during power or telecommunications outages and sees potential to build on the digital euro's infrastructure, which could launch in 2029 if EU lawmakers approve the required rules.
Sweden's central bank is calling on lawmakers to reconsider a digital krona, warning that foreign-currency stablecoins and the European Union's planned digital euro could erode the currency's role in payments.
An e-krona would give the public access to central bank money in digital form — a so-called central bank digital currency, or CBDC, a category of money that central banks around the world have been studying as payments shift online. A 2023 government inquiry found too little need to issue one, but Sveriges Riksbank, the world's oldest central bank, says changes in how people pay and growing security risks may warrant a new review, CoinDesk reported.
"If our cash becomes digital and Swedish kronor are not available in a usable digital form, then the krona may not be able to compete with other, more convenient digital payment instruments that can easily be used across borders," Deputy Governor Per Jansson told Reuters on the sidelines of a conference.
The Riksbank has not taken a position on issuing an e-krona, but it wants legislators to begin preparing legislation now, since the work would take at least five years. The bank has previously conducted technical pilot testing of the digital currency leaving any issuance decision to elected officials.
In a letter to parliament's Committee on Finance, the central bank warned that stablecoins pegged to foreign currencies could reduce demand for the krona. It sees little near-term risk but says the long-term threat remains.
Cash use has fallen sharply in Sweden. Just 5% of Swedes surveyed used cash for their most recent purchase, according to Riksbank data cited in the letter, and a shift away from the krona could make it harder for the bank to steer the economy and protect financial stability.
The Riksbank also views an e-krona as a backup payment option during power or telecommunications outages, with offline payments among its potential features.
Sweden could draw on the digital euro's infrastructure to build such a system. The European Central Bank's digital euro project could see the digital euro debut in 2029 if EU lawmakers approve the required rules — a timeline that overlaps with the five-year runway the Riksbank says Swedish legislation would need. Attention now turns to how the Committee on Finance responds to the bank's letter and whether EU lawmakers advance the rules on which the digital euro's debut depends.
