Bankers Fear Sweden’s Proposed Digital Currency May Fundamentally Change Banking
Swedish bankers have expressed concerns over the country’s proposed CBDC dubbed e-krona according to a Reuters report on Tuesday. This pipeline CBDC has been in the works for over a year and is being considered for mainstream roll out by Riksbank, Sweden’s monetary authority.
Per the latest update from Riksbank’s finance committee, they have already launched a review looking into the feasibility of issuing e-krona. Earlier, Riksbank had said that it intends to make the use of e-krona payments as seamless as sending a text.
While progressive, and in line with the Swedish prevalent use of electronic money, the developments on e-krona seem to not sit well with the bankers. According to the report by Reuters, a new way to pay poses an existential threat for the bankers.
Masih Yazdi who is the CFO of SEB, Sweden’s largest corporate bank, told Reuters that e-krona would disrupt the country’s banking ecosystem. He highlighted that deposits would flee to be held in form of e-krona, essentially cutting out the bankers who act as middlemen. Yazdi noted that ‘A rational household would hold its money with the Riksbank.’
His sentiments were further echoed by Swedish Bankers Association adviser Rickard Eriksson, who raised key questions on how Riksbank would facilitate circulation, should deposits then shift into their hands. According to Rickard’s logic, financing is likely to be influenced by Riksbank’s risk appetite if e-krona goes mainstream; a function that is currently under banks.
Other than destabilizing the financial ecosystem, Yazdi added that Riksbank would have to extend its functions to touch on matters of privacy given that e-krona will be a traceable CBDC.
In response to these concerns, Riksbank’s Deputy Governor Cecilia Skingsley said that the banks are already facing cyber run risks, adding that e-krona would not worsen this situation. Meanwhile, CBDC plans are still underway in jurisdictions such as China whose digital yuan is in its pilot phase. The Bahamas have already rolled out its CBDC ‘Sand dollar’ in October of last year.