Sweden is moving closer to eliminating cash entirely from its society. The country announced a review last week to study the possibility of introducing a digital currency issued by its central bank. Anna Kinberg Batra, a former chairwoman of the Riksbank's finance committee, will lead the inquiry, which is expected to end in November 2022.
The review is the latest in a series of steps taken by Sweden in recent years to remove cash from its economy. Back in February, it launched a pilot project with consulting firm Accenture plc (ACN) as a technology partner to simulate the workings of an e-krona in its daily economy in an "isolated test environment." The Riksbank, Sweden's central bank, has also issued a series of papers and studies in the past five years discussing the role that a digital currency administered by it could play in society.
- The Swedish government announced a review to study the possibility of introducing a digital currency by its central bank.
- The review is the latest in a series of steps that the country has taken in recent times to study the effect a central bank digital currency (CBDC) might have on its economy.
- Cash usage in Sweden is less than 10%; hence, the country is ideally suited to become the world's first cashless society.
A Sweden Without Cash
Sweden has been traveling the digital currency route for some time now. The percentage of cash payments in the country declined from 40% in 2010 to 15% by 2016. The pandemic has further accelerated the trend: the Riksbank estimates that cash usage is now less than 10% of the overall economy. As of 2018, about 1% of Sweden's gross domestic product (GDP) existed in banknotes. The scarcity of cash coupled with the convenience of electronic payments should make it easier for Swedish society to tip into a cashless future.
According to a study on central bank digital currencies released in 2017, issuance of an e-krona would have limited effects on the monetary policy and financial stability of the country. It was also unlikely to displace the pivotal role played by the Riksbank in determining economic direction. This is especially important considering the entry of private corporations into the digital currency ecosystem. A review, released in June this year, detailed imperatives for a CBDC, including the digitalization of society and privacy concerns due to the entry of companies like Facebook, Inc. (FB) into digital payments.
But the Scandinavian country is yet to figure out the specifics of implementing a digital currency. "… it's crucial that the digitalized payments market functions safely, and that it's available to everybody," said Per Bolund, Sweden's financial markets minister, while announcing the latest review. "Depending on how a digital currency is designed and which technologies are used, it can have large consequences for the entire financial system."
Policymaking around a CBDC is also yet to be determined. "The Riksbank has not yet taken a formal decision on whether or not to issue an e-krona. A decision to issue an e-krona requires a legal basis and political support," Stefan Ingves, Riksbank governor, told journalists in October.
By some measures, China is ahead of Sweden in CBDC implementation. The Asian giant has already introduced the digital yuan on e-commerce platforms within the country. But China's ambitions are not as all-encompassing as those of Sweden, which intends to replace all cash transactions in its economy with their electronic equivalent. China's digital currency will exist aside other payment methods in its economy.