Swedish bankers are weighing up the risks of a digital currency to their deposit base, as plans for the rollout of an e-krona continue at pace.
According to reports in Reuters, commercial banks in the country are considering whether the rollout of the e-krona could undermine their role in the financial system, effectively removing banks as a middle man between consumers and the central Riksbank.
Noting the more attractive interest rates and consumer protections, Masih Yazdi, chief financial officer of Swedish bank SEB, said “a rational household would hold its money with the Riksbank.”
A trend towards greater reliance on digital currencies could ultimately deprive commercial banks of liquidity, which Yazdi suggests could see more institutions relying on wholesale markets to source funds: “If you have a bank account but you can – at the click of a button – move your money to the central bank … that could risk instability in the system.”
However, the risks were downplayed by Riksbank Deputy Governor Cecilia Skingsley, who said treasury bills already offered an effective opt out for parties to exit the banking system.
“We already have to face the risks that there are cyber runs out of the banking system. I don’t think a CBDC will fundamentally change that to a worse situation.”
The concerns come at a time of a global push towards central bank digital currencies, with reserve banks around the world at various stages of developing, trialing and deploying state-backed digital currencies.
Digital currencies such as the e-krona allow for the benefits of blockchain transactions with the reliability and flexibility of fiat, effectively taking retail and wholesale payments on-chain.
However, with concerns over the impact of central bank digital currencies on the mainstream financial system, the greater reliance on digital currencies could mark a more fundamental shift.