Sweden’s central bank has signalled a renewed interest in a sovereign digital currency, asking legislators to begin work on a legal framework for a digital krona. The move comes as the European Central Bank accelerates its own digital euro project and stablecoins gain traction worldwide.

Background

The Riksbank’s latest request follows a 2024 government inquiry that concluded there was insufficient demand for a CBDC at that time. However, the central bank now points to two external developments that could reshape the payments landscape: the European Central Bank’s roadmap for a digital euro and the expanding ecosystem of stablecoins tied to foreign currencies, especially the US dollar.

Legislative Push

In a letter dated 7 October, the Riksbank addressed the Finance Committee of Sweden’s parliament, urging an early start on the necessary legal preparations. While the central bank acknowledges that a full rollout could take at least five years, it stresses that the legislative groundwork must begin now to avoid future delays. The recommendation is precautionary; the Riksbank does not rule out abandoning the project after the legal work is completed.

Competitive Pressures

The Riksbank highlighted that a digital euro pilot slated for 2027, with a possible public launch in 2029, could make Sweden’s payment infrastructure appear outdated if it lacks a comparable offering. Additionally, the growing popularity of stablecoins pegged to foreign currencies could erode the use of the Swedish krona within its own borders. The central bank characterises the immediate risk as modest but warns that, over time, these assets could become attractive payment alternatives, putting pressure on the national currency.

Timeline and Next Steps

According to the Riksbank’s estimates, developing a functional digital krona would require a minimum of five years, not counting the time needed for legislative changes. Consequently, the institution recommends that parliament act promptly to draft the required legal framework, even if the final decision on launching a CBDC remains open.

Why it matters

Sweden’s reconsideration of a digital krona reflects a broader shift among central banks to safeguard the relevance of national currencies in an increasingly digital world. By aligning its regulatory timeline with the ECB’s digital euro ambitions, Sweden aims to maintain competitive parity in cross-border payments and mitigate the influence of foreign-denominated stablecoins on its domestic economy.