Facing the prospect of a digital euro and the near-disappearance of cash from its payments infrastructure, Sweden is considering reviving its central bank digital currency (CBDC) project, which it shelved three years ago.
The deputy governor of Sweden’s central bank, the Riksbank, told Reuters that it may be time to revisit the proposal. The bank wants lawmakers to begin drafting legislation for the so-called e-krona, a process that could put a launch at least five years away.
Sweden’s declining reliance on physical cash raises concerns that the krona could lose ground to more convenient digital payment options, especially those usable across borders, per the deputy governor.
Back to the Drawing Board
The Riksbank began exploring a CBDC nearly a decade ago to preserve public access to a state-guaranteed means of payment. After years of research, however, it concluded in 2023 that there was no urgent need to introduce one.
“I don’t think Sweden fully abandoned the e-krona,” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research. “I think it just saw no immediate need in the past. The payment landscape is changing with the digital euro, growing stablecoin adoption, etc., and the concerns about payment resilience are making Sweden reconsider it.”
Strengthening the Krona
With the digital euro expected to launch in a couple of years, Sweden faces the prospect of increased competition from a digital currency backed by the European Central Bank. The concern is particularly relevant for Sweden, one of six EU members that retain their own currencies rather than adopting the euro.
“Sweden still uses the krona,” Hugentobler said. “The concern is that the digital euro could move more payments and usage into euros, weakening the krona’s role. The e-krona could potentially defend that position.”
The country’s sharp decline in cash use adds to the pressure. Just 5% of Swedes surveyed said they used cash for their most recent purchase, according to Riksbank data.
The Riksbank could potentially build its system using infrastructure developed for the digital euro. It also sees the e-krona as a backup payment method during power or telecommunications outages, with offline functionality planned as a key feature.