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Sweden's Central Bank Considers Digital Currency

Consumers are skeptical

January 17, 2017 | Retail & Ecommerce

The central bank of Sweden is considering issuing a digital currency in response to a drastic decline in the use of cash in the country. If the so-called e-krona is introduced, Sweden would be the first European country to have central bank-backed virtual money, just as it was the first to issue paper banknotes more than 300 years ago.

Internet Users in Select Countries in Europe Who Use Mobile Payments*, Sep 2016 (% of respondents)

Ecuador was the first country to launch its own virtual currency.

While banks in Sweden already have access to digital money, the government currently provides only banknotes and coins to consumers. But, according to a statement from the country's central bank, the amount of cash in circulation in Sweden has fallen by 40% since 2009, due in large part to a rise in online shopping and alternative payment methods. This has forced the bank to seriously debate a move toward a virtual currency.

Consumers in Sweden are skeptical of the idea, however. According to a December 2016 survey by Tieto, nearly half of internet users in the country did not think that the central bank should issue a digital currency in addition to the existing bank notes and coins, compared with just 9% who thought that it should. About three in ten were neutral on the issue.

The apprehension toward a digital currency in Sweden is somewhat surprising given that consumers there are already avid users of other alternative payment methods. Credit and debit cards are the most popular way to pay by far, but the use of mobile payments, for example, is also widespread. Based on data from AudienceProject, 77% of internet users in the country had used some type of mobile payment service as of Q4 2016.

Visa's September 2016 survey placed mobile payment usage in the country even higher, at 86% of internet users, but its figure includes both managing money and making a payment in-person or online.

So what's behind the uncertainty toward a digital currency?

It's likely that it stems from a distrust of virtual money in general. Cryptocurrency Bitcoin has an unsavory reputation among some consumers, who associate it with criminal activities. Unlike Bitcoin, however, the planned e-krona will be regulated by the government, and Sweden's central bank has made it clear that there will be security measures in place to ensure that it does not support illegal activity.

Still, regulation is not the only issue that Sweden's central bank is grappling with when it comes to deciding on whether to introduce electronic money. The bank is concerned about possible financial instability, for example, and also needs to determine what technology to use to deliver the digital currency. The central bank is expected to reach a decision on the e-krona within the next two years.

—Jasmine Enberg

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