- Sweden’s central bank, the Sveriges Riksbank, has stated that the adoption of a potential digital euro will not displace the Swedish krona.
- The bank sees potential benefits for Sweden in the digital euro, including a more robust and competitive payment system.
- Despite a possible small shift away from traditional bank deposits, the impact will be limited due to the proposed cap on individual holdings of digital euros.
Sweden’s central bank has affirmed that the potential adoption of a digital euro will not displace the Swedish krona, highlighting potential benefits for the nation’s payment system.
Adoption of Digital Euro and Its Impact
The Sveriges Riksbank, in a staff memo published recently, indicated that the adoption of a digital euro could result in a more robust and competitive payment system for Sweden. While there may be a slight shift away from traditional bank deposits, the bank believes that the impact will be minimal due to the proposed cap on individual holdings of digital euros. The use of the digital euro could extend beyond the eurozone, with a proposal allowing non-eurozone members to potentially join the system through agreements with the European Central Bank (ECB).
Swedish Krona Remains Primary Currency
The central bank of Sweden downplayed the impact of a potential agreement with the ECB, arguing that institutional factors won’t “crowd out” the krona. Payments involving the government are conducted in Swedish kronor, solidifying its position as the primary currency. The bank stated, “For instance, given we pay our taxes in Swedish kronor, we also prefer to receive our salary in Swedish kronor. And when businesses pay salaries, their main expenditures, in Swedish kronor, they prefer to charge customers in Swedish kronor.”
EU’s Progress with Digital Euro
The European Central Bank (ECB) launched a two-year planning stage for the digital euro project late last year. The goals for this period include finalizing the rules, choosing private sector partners, and running tests and experiments. According to the EU’s draft proposal, the advantages of a digital euro are significant, while the potential downsides tied to not having one could be substantial.
Swedish e-Krona and Digital Euro
The decision to launch a digital Swedish krona, or e-krona, hinges on the development of the digital euro. An e-krona would bolster the Swedish krona’s position within Sweden if the digital euro becomes widely used, according to the bank. Additionally, leveraging the technology and regulations built for the digital euro could significantly reduce the cost and complexity of launching an e-krona.
Conclusion
The adoption of a digital euro will not displace the Swedish krona, according to Sweden’s central bank. The bank sees potential benefits for Sweden in the digital euro, including a more robust and competitive payment system. The decision to launch a digital Swedish krona, or e-krona, hinges on the development of the digital euro.
