Without a Digital Currency, Sweden Faces the Privatization of Money


Retail payments in Sweden are now almost entirely cashless. Without a central bank digital currency (CBDC) Sweden’s entire payments market would be reliant on the private financial sector.


Cecilia Skingsley, Deputy Governor of the Central Bank of Sweden, has authored an article as part of the World Economic Forum’s Annual Meeting of the Global Future Councils. The piece describes the financial issues issue faced by Sweden.

A Historical Change

In Sweden today, cash in circulation forms just 1% of the countries GDP. Skingsley writes:

If cash stopped working, it would leave all individuals to rely on the private sector for access to money and payment methods. It would be a historical change without precedence.

In Sweden, retailers don’t have to accept cash at all, and some banks don’t offer cash services. On top of this, citizens are open to new, cashless, technologies quickly adopting payment cards, applications, and even cryptocurrencies.

The payment application Swish has been downloaded by half the population and is even used to pay pocket money and at street markets. Settlements are enabled by the central bank’s real-time gross settlement system. Skingsley says:

Swedes could therefore find themselves in a situation where cash is no longer generally accepted as a means of payment.

If the central bank takes no action, says Skingsley, it would need to accept Swedes will not be accessing central bank controlled money changing the “scope for the public sector.”

The payment market would have to be regulated and supervised in new ways to meet fulfil the objective to have a safe, efficient and inclusive payment market.

The e-krona

Or, Sweden’s central bank could pursue its concept “e-krona” central bank digital currency (CBDC), an idea that was first revealed in 2016. Skingsley revealed a few details of the basic concept:

It would be digital, and have a 1-to-1 conversion with an ordinary krona held in an account at the Riksbank or stored locally, for example on a card or in a mobile phone app.

The Central Bank of Sweden (Sveriges Riksbank), would provide the infrastructure for e-krona transactions and payment service providers. Skingsley speculates on whether the currency would earn interest or not, but in her article, avoids comment on the use of blockchain technology.

In the bank’s last formal report on the e-krona, issued on October 26, 2018, it confirms it is beginning to design a technical solution to “test which solutions are practicable and possible to realise.”

The report confirms of blockchain, or distributed ledger technology (DLT):

Our opinion is that it is not appropriate to develop an e‐krona based on one of the current versions of DLT.

However, due to the pace of technological improvement for blockchain and DLT, the e-krona project “cannot therefore rule out a DLT solution becoming relevant in the longer term.” The report also states that whichever technology it pursues it must be “able to interact with DLT.”

Sweden is not alone in considering a cashless future. The Bank of Korea, in the world’s third-largest cryptocurrency market, is also considering the potential of a CBDC and Spain has recently announced that it is exploring the concept.

How long do you think it will take for a credible CBDC to emerge and will blockchain or DLT be used?


Images courtesy of Shutterstock.