(Bloomberg) -- The Swedish central bank’s deliberation on creating an electronic currency is sounding the alarm at the country’s lenders.
The Nordic country is moving quickly toward becoming the world’s first cashless society, which has raised concerns at the central bank. Policy makers have started investigating the possibility of introducing an electronic complement to cash, or what it calls an e-krona.
But an electronic currency risks competing with private banks and doesn’t go hand-in-hand with parallel plans to force banks to take more responsibility for cash handling, said Hans Lindberg, the chief executive officer of the Swedish Bankers’ Association. The Riksbank is perhaps trying to solve a problem that doesn’t exist, he said.
“When it comes to electronic money, there’s already plenty,” he said in an interview in Stockholm on April 17. “There are bank cards, credit cards, Swish and other electronic solutions. The best option also going forward is probably that the Riksbank sticks to wholesale.”
A parliamentary review in Sweden is at the same time working on new measures designed to stop the decline of cash and to maintain a basic cash infrastructure. One idea floated by Riksbank Governor Stefan Ingves is to force banks to offer cash handling services.
Such plans risk running into EU law, according to Lindberg. “I think you need to define what the state’s obligations should be,” he said.
The central bank’s suggestion that private banks should deal with cash handling also comes after the Riksbank since the 1980s dismantled much of its cash infrastructure, including closing more than 20 offices around Sweden.
“Bills in circulation have decreased but banks have kept ATMs and opened more cash handling centers, so I think banks have taken their responsibility,” Lindberg said.
Riksbank Deputy Governor Martin Floden has said that it would be a big step back for the bank to, for example, reopen its offices.
Recently, there have also been signs that the decline of cash in circulation is beginning to flatten out, suggesting it can’t go much further, Lindberg said. The Bank for International Settlements also recently warned that a central bank digital currency could create new risks by allowing for digital runs on central banks “with unprecedented speed and scale.”
For now, Lindberg is sanguine that the central bank won’t go down the route of creating an e-krona.
“I don’t really see the need for such a solution, and I’m fairly certain that they won’t end up with that kind of solution either, because it doesn’t solve any societal problem,” Lindberg said. “It would rather create problems instead.”
©2018 Bloomberg L.P.