Sweden’s Cash Conundrum: Central Bank Takes Bold Step to Preserve Physical Money

In an effort to remain relevant in an increasingly digital society, Sweden’s central bank has announced plans to introduce a new electronic currency that will complement traditional cash. This move comes as concerns grow over the disappearance of physical banks and cash deposit machines, particularly in rural areas.

The Cashless Concerns

According to figures, more than 280,000 people in Sweden need to travel over 20 kilometers to access a cash deposit machine. This has led to calls for a rethink on the country’s shift towards a cashless society. The Swedish parliament recently passed a law requiring banks to ensure that ATMs are accessible and businesses can still make deposits.

The Concerns of Critics

However, critics argue that this move may not be enough to stem the tide of cashlessness. A study by the Swedish Retail and Wholesale Council found that half of retailers expect to stop accepting cash by 2025.

The Riksbank’s Solution

The Swedish central bank, Riksbank, has warned that if nothing is done, Sweden risks losing its ability to have a secure form of money in circulation. “A financial system dominated by private banks without central bank anchorage would risk returning Sweden to a chaotic period of history,” said KTH’s Niklas Arvidsson.

The introduction of an electronic currency could provide a solution to this problem. The Riksbank has envisioned its CBDC (Central Bank Digital Currency) as a complement to cash, rather than a replacement. The pilot program will allow simulated users to hold e-krónor in a digital wallet and make payments, deposits, and withdrawals via a mobile app.

The Potential for State Control

The move is seen by some as an opportunity for the state to regain control over money and wrestle market power away from commercial banks. “This is not something we would consider in the UK or US,” said Carsten Sørensen, who runs the London School of Economics’ Cryptocurrency and Disruption course. “But the state there [in Sweden] is a much stronger entity in society.”

Next Steps

The pilot program is expected to launch next year, although adjustments may be necessary due to the ongoing COVID-19 crisis.

Conclusion

For now, it remains to be seen whether Sweden’s bold move will be enough to preserve its cash culture. One thing is certain, however: the country’s institutions are taking a proactive approach to shaping the future of money in Sweden.