The Swedish Central Bank, or Riksbank, announced on Thursday that they are “working to prepare for an issueable e-krona,” a central bank digital currency (CBDC) for the Nordic country, adding to a cavalcade of global CBDC activity as 2022 draws to a close.
“The Riksbank is investigating the possibility of issuing a digital supplement to cash, the so-called e-krona,” they wrote in a policy update. “This would preserve public access to government-issued money even if cash is further marginalized.”
While no final decision has been made by the Swedish parliament (Riksdag) on whether or not to issue an e-krona, “It is important that the Riksbank is ready to be able to issue an e-krona if the Riksdag decides to do so,” they wrote.
The Riksbank began the process of exploration and development of a CBDC in Dec. 2020 when the government appointed an investigation to analyze the state’s future role in the payment market, including whether Sweden needs the e-krona.
The Riksbank said that an e-krona could help to preserve, strengthen and renew the payment market in the country. “Today, the public has access to Swedish kronor in two forms – state-issued money in the form of cash and digital money issued by private actors.”
They wrote that deposits with commercial banks are the most common form of money in the system today, and as cash is less and less used, they see a risk that at some point the public will no longer have the ability to access and pay with state-issued money. “Companies and individuals would then become completely dependent on private actors to be able to pay,” they said.
The Riksbank sees the e-krona as a means of ensuring that they preserve key functions of cash in a future where cash is no longer used, including the ability to exchange every krona deposited in a Swedish commercial bank into money issued by the Riksbank.
“This is important, as it means that a krone is worth the same amount regardless of which bank it is in,” they wrote. “The Riksbank and other central banks usually do this with cash, and [CBDCs] ensure that we have a uniform monetary system.”
The Riksbank said they believe that an e-krona could also serve to strengthen the resilience of the payment market by complementing the supply of money and payment services from the private sector.
“It is important that there are several alternatives in the event of serious disruptions in the banks’ or card companies’ systems,” they said, adding that e-krona could also give non-bank actors direct access to an alternative payment infrastructure, enabling them to offer payment services to Swedish customers. “This could make it easier for smaller and new actors to develop new innovative solutions and products.”
The investigation was scheduled to submit its findings by November 30, 2022, but it has since been extended to Mar. 31, 2023.
Global CBDC activity on the rise
Since 2020, the Riksbank has participated in an international working group with the European Central Bank (ECB) and the central banks of Japan, Canada, Switzerland, Great Britain and the United States to “share lessons learned, create a common view on and discuss the way forward for publicly accessible digital central bank money.”
The last few weeks have seen a flurry of CBDC announcements from central banks. On Dec. 15, EU leaders signed the Joint Declaration on EU legislative priorities for 2023 and 2024, which included a section on the creation of a CBDC for the EU.
“We will give due attention to the review of EU economic governance to ensure it functions to support the EU and Member State economies and work to strengthen the capital markets and the role of the euro, including the digital euro, and complete the banking union,” the joint declaration said.
On Dec. 5, Spain’s central bank announced their own wholesale CBDC project separately from the EU. “The fundamental objective of central banks is to determine the effective capacity of these digital assets to increase the efficiency, agility and security with which financial market infrastructures operate,” the bank said.
Indonesia’s central bank announced their own CBDC initiative on Dec. 1, with Bank Indonesia Governor Perry Warjiyo writing that central banks view CBDCs as “a prospective future-proof solution” to monetary disruptions from stablecoins and unbacked crypto assets, which could bring “macrofinancial risk in the form of shadow currency and shadow banking that undermine the effectiveness of central bank policy.”
And the National Bank of Ukraine (NBU) published a draft concept on Nov. 28. for their own CBDC. The ‘e-hryvnia’ world be “an electronic form of the monetary unit of Ukraine” and its purpose would be “to effectively perform all the functions of money, supplementing the cash and non-cash forms of the hryvnia.”
“The development and implementation of the e-hryvnia can be the next step in the evolution of the payment infrastructure of Ukraine,” said Deputy Chairman of the National Bank Oleksiy Shaban. “It will contribute to the digitalization of the economy, the further spread of cashless payments, the reduction of their cost, the increase in the level of their transparency and the increase of trust in the national currency in general.”