The Swedish Payments Laboratory

Sweden is often considered a payments laboratory for the rest of the world. It has often been at the vanguard of different trends. It is amongst the countries with the lowest levels of cash in circulationThe value (or number of units) of the banknotes and coins in circulation within an economy. Cash in circulation is included in the M1 monetary aggregate and comprises only the banknotes and coins in circulation outside the Monetary Financial Institutions (MFI), as stated in the consolidated balance sheet of the MFIs, which means that the cash issued and held by the MFIs has been subtracted (“cash reserves”). Cash in circulation does not include the balance of the central bank’s own banknot... More, measured in relation to GDP, as illustrated by the chart below.

Sweden is also among the first countries to adopt regulations to ensure the access to and acceptance of cashMoney in physical form such as banknotes and coins. More. A new law took effect on January 1st, requiring banks to provide adequate cash services. The law was designed to protect the more fragile people such as older people, migrants, those with disabilities, the rural or those who do not have access to digital payments.

Riksbank Calls for Further Protection of Cash

The central bank has voiced concern about the risks associated with the privatisation of moneyFrom the Latin word moneta, nickname that was given by Romans to the goddess Juno because there was a minting workshop next to her temple. Money is any item that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular region, country or socio-economic context. Its onset dates back to the origins of humanity and its physical representation has taken on very varied forms until the appearance of metal coins. The banknote, a typical representati... More. In 2018, Riksbank’s Governor Stefan Ingves wrote,

“the paymentA transfer of funds which discharges an obligation on the part of a payer vis-à-vis a payee. More system is often said to have an element of public good, which implies that the public sector has an important role – in this case, in ensuring that payments can be made safely and efficiently at all times. Other examples of public good are the armed forces, the judicial system and official statistics. Most citizens would feel uncomfortable handing these public services to private companies entirely.”

In October 2019, Ingves called for more robust legal protection for cash. “If it were to be established by law that one was forced to accept cash in Sweden, more of us would probably choose to have cash in our wallets.” said Ingves. The Central Bank had proposed to the Parliament in April to establish a committee to review the concept of legal tenderMoney that is legally valid for the payment of debts and must be accepted for that purpose when offered. Each jurisdiction determines what is legal tender, but essentially it is anything which when offered (“tendered”) in payment of a debt extinguishes the debt. There is no obligation on the creditor to accept the tendered payment, but the act of tendering the payment in legal tender discharges the debt. More.

Sweden has also been amongst the first countries in the world to consider introducing a digital currencyThe money used in a particular country at a particular time, like dollar, yen, euro, etc., consisting of banknotes and coins, that does not require endorsement as a medium of exchange. More. The central bank is already running a pilot project with Accenture Plc to raise an e-krona based on the same blockchainAn unchangeable digital record where transactions are processed and verified by a network of independent computers rather than by a single referee. This decentralised structure has been described as an open distributed ledger. It supposedly enhances security as there is no single entity to be hacked. It also protects personal identity and guarantees that governments can’t block transactions or otherwise manipulate the payments space. The blockchain is the underlying technology supporting most ... More technology that underpins digital currencies like BitcoinBitcoin is commonly said to be a cryptocurrency, a digital means of exchange developed by a set of anonymous authors under the pseudonym of Satoshi Nakamoto, which began operating in 2009 as a community project (Wikipedia type), without the relationship or dependency of any government, state, company or body, and whose value (formed by a complicated system of mathematical algorithms and cryptography) is not supported by any central bank or authority. Bitcoins are essentially accounting entries i... More.

On 11 December, the Ministry of Finance announced that a special investigator would review the state’s role in the payment market and determine what the part should look like in the future. The review will be based on a thorough and broad analysis of the following:

• The current and historical part of the state,
• Changes in the financial and payment markets as a result of technological development and digitalisation,
• New payment methods and declining use of banknotes, coins and cash
• The future payment market.

The Division of Roles Between State and Business

The investigator shall, among other things:

• Map out what the payment market looks like; how it is regulated, and assess what the future payment market will look like based on developments in Sweden and in other countries,
• Map the division of roles between the state and the business community in the payment market and take a position on the state’s future role in the payment market,
• Take a position on the meaning and need for specific means of payment to have the status of legal tender,
• Take a position on the need for the Riksbank to issue digital central bank moneyA liability of a central bank, including banknotes in circulation and banks’ deposits with the central bank. More, so-called e-krona, and
• Decide whether constitutional proposals or other measures are necessary and, if necessary, propose such.

A reference group with representatives of all political parties in the Riksdag shall be attached to the investigator. The review must be completed no later than 30 November 2022.

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