Sweden’s central bank revives e-krona debate as stablecoins and digital euro loom

Sweden’s central bank is calling for lawmakers to reconsider a digital krona, warning that foreign-currency stablecoins and a planned digital euro could erode the currency’s role in payments.

An e-krona would give the public access to central bank money in digital form. A 2023 government inquiry found too little need for one, but the Riksbank says changes in how people pay and growing security risks may warrant a new review.

“If our cash becomes digital and Swedish kronor are not available in a usable digital form, then the krona may not be able to compete with other, more convenient digital payment instruments that can easily be used across borders,” Deputy Governor Per Jansson told Reuters on the sidelines of a conference.

The Riksbank hasn’t taken a position on issuing one, but wants lawmakers to start preparing legislation now, since the work would take at least five years.

The central bank warned that stablecoins tied to foreign currencies could reduce demand for the krona in a recent letter. It sees little near-term risk but says the long-term threat remains.

Cash use has fallen sharply in the country. Just 5% of Swedes surveyed used cash for their last purchase, according to Riksbank data cited in the report, and a shift away from the krona could make it harder for the bank to steer the economy and protect financial stability.

The Riksbank also sees an e-krona as a backup payment option during power or telecom outages, with offline payments among its potential features.

Sweden could draw on the digital euro’s infrastructure to build the system, with that central bank digital currency potentially debuting in 2029 if EU lawmakers approved the required rules.