The potential adoption of a digital euro by Sweden won’t displace the Swedish krona, according to Sweden’s central bank. In a staff memo, Sveriges Riksbank outlined the potential benefits of a digital euro for Sweden, including a more robust payment system and increased competition. However, the bank believes any impact on traditional bank deposits will be limited due to proposed caps on individual holdings of digital euros.
While the digital euro is designed for eurozone countries, non-eurozone members could potentially join the system through agreements with the European Central Bank (ECB). This would allow residents and businesses in those countries equal access to the digital euro. Sweden’s central bank downplays the impact of this potential agreement, stating that institutional factors won’t diminish the prominence of the krona as the primary currency.
The European Central Bank (ECB) has launched a two-year planning stage for the digital euro project, aiming to finalize rules, choose private sector partners, and conduct tests and experiments. A draft proposal from the EU highlights the significant advantages of a digital euro and the potential downsides of not having one, including possible limits on individual holdings of digital euros.
The digital euro could pose a threat to the stability of the Swedish krona, leading to potential price swings and businesses pricing goods in euros. However, the decision to launch a digital Swedish krona, or e-krona, hinges on the development of the digital euro. Leveraging the technology and regulations built for the digital euro could reduce the cost and complexity of launching an e-krona and improve cross-border payments between digital currencies.
