Sweden's central bank, Sveriges Riksbank, dismissed concerns that the potential adoption of a digital euro could displace the Swedish krona. In a staff memo released on Tuesday, the bank outlined its perspective on the implications of the digital euro for Sweden's currency landscape.

Benefits of Digital Euro for Sweden

The Riksbank acknowledged potential benefits for Sweden in the introduction of the digital euro, particularly in enhancing the robustness and competitiveness of the payment system. However, it emphasized that any impact on traditional bank deposits would likely be limited due to proposed caps on individual holdings of digital euros.

Extended Access and Limited Impact

While the digital euro is primarily designed for eurozone countries, a proposal allows non-eurozone members to potentially join the system through agreements with the European Central Bank (ECB). Despite this possibility, the Riksbank downplayed the potential impact on the krona, citing institutional factors that solidify its position as the primary currency in Sweden.

Focus on Krona Stability and E-Krona Development

The Riksbank highlighted the importance of maintaining stability in the Swedish krona amidst discussions surrounding the digital euro. It emphasized that the decision to launch a digital Swedish krona, or e-krona, would be influenced by developments related to the digital euro. Leveraging technology and regulations from the digital euro project could streamline the launch of an e-krona and facilitate smoother cross-border payments.

EU's Exploration of Digital Euro

Meanwhile, the European Central Bank (ECB) has initiated a two-year planning stage for the digital euro project, aiming to finalize rules, select private sector partners, and conduct tests and experiments. The potential advantages of a digital euro, as outlined in the EU's draft proposal, are significant, with potential downsides associated with not having one.

Conclusion: Coexistence of Digital Currencies

The coexistence of digital euro and e-krona could pave the way for improved cross-border transactions and payment systems. Despite the exploration of digital currencies, the Swedish krona is expected to maintain its stability and significance within Sweden's financial ecosystem.