(Bloomberg) -- Sweden’s government rejected a plea from the central bank to force the country’s banks to handle cash, arguing that it could distort competition and even result in branch closures.
That’s because some lenders are pure online banks without any branches while others operate vast branch networks. Legislation requiring those with physical premises to provide and accept notes and coins would be unfair, Financial Markets Minister Per Bolund said in an April 25 phone interview.
Sweden is rapidly evolving into the world’s first cashless society as consumers dump cash in favor of cards and digital solutions. Notes and coins in circulation has more than halved in the past decade and most bank branches no longer manually deal with cash.
That has sparked a heated debate, with Riksbank Governor Stefan Ingves calling for new legislation that would force banks to handle cash. The general public is “enormously frustrated” about what’s going on and something “will have to be done,” Ingves said in an interview on Thursday.
If there’s no legislation to force banks to hold cash then “technically we are going to move to a completely different environment,” Ingves said. “That’s why we are also looking into maybe in the future issuing a digital currency in one form or the other.”
But apart from competition concerns, Bolund said he’s worried that legislation could also hurt access to banking services in general, especially in more remote parts of Sweden.
"Instead of a cashless bank branch that offers some services, the bank may choose to close down that office completely, simply because it’s no longer profitable,” he said. "Then you risk getting worse service in the countryside than you otherwise would have had."
Ingves said that if it’s made compulsory for everybody to handle cash in one form or the other, it doesn’t distort competition. It’s also not compulsory to run a bank but it comes with some requirements, he said.
“And part of that at least in my view is that you need to handle cash,” he said.
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