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MONEY

What you need to know about Sweden’s plans for a digital currency

Sweden has taken one step closer towards its own digital currency – the “e-krona”.

A woman rejecting cash.
A digital currency is not meant to replace cash in Sweden. Photo: Fredrik Sandberg/TT

Plans to launch Sweden’s own digital currency, which have been in the pipeline since 2016, recently passed the first pilot stage, the country’s Central Bank (The Riksbank) announced in a press release.

So why is Sweden doing this?

Cash is dying a slow death in Sweden, with alternative methods of payment commonplace. The number of notes and coins in circulation has reduced by 40 percent since 2009, while popular smartphone apps like Swish allow electronic payments to be made almost as quickly as handing over physical money. Swedes are also among the world’s biggest card users.

“Sweden is noticeably further ahead than the UK, mainland Europe and the US, which is a long way behind in this trend. Because of how technologically developed it is, you see a lot of new interesting things in economics quite a while before you see it elsewhere,” HSBC global economist James Pomeroy told The Local back in 2018.

But what does a cashless society truly mean?

Sweden has previously been predicted to transform into a cashless society by 2030 with 80 percent of retail payments already made by card.

Concerns have been raised, including by the Riksbank, about how the cashless society affect certain groups, for example international residents who can’t sign up for certain digital payment methods without a Swedish bank account or personnummer, and the elderly.

So although physical payments are declining, the Riksbank wants the e-krona to be seen as a complement to cash.

The piloted digital currency also has similarities to cash. E-kronor are uniquely identifiable and can only be created by the Riksbank, similar to actual physical money.

How exactly would an e-krona work?

The e-krona used in the Riksbank’s pilot project uses blockchain technology and is in the shape of a singular “token”. Transactions are completed through nodes which are run by the Riksbank and other participants such as payment service providers.

A service provider can request e-kronor that are issued from the Riksbank in exchange for the user debiting their account in the Riksbank’s settlement system RIX.

The customer can then exchange money in their bank accounts for e-kronor, that they can use for transactions instead.

When a person uses e-kronor for a transaction, the service providers’ nodes verify that the e-krona can be traced back to the Riksbank. The e-krona is then registered as consumed and the transaction is accepted.


An image provided by the Riksbank shows how the e-krona could work.

What happens now?

Following on from the pilot, the Riksbank said they will continue to work on a digital currency that will be usable in everyday life.

Phase 2 will include working with potential distributors, developing offline functions and assessing scalability for retail payments. This phase is expected to last at least a year.

How likely is a digital currency actually to happen?

There is still a long way to go before a digital currency is a reality. Several huge questions remain. For example, there is currently no legislation within this area, and new legislation would be needed. User identity protection is also an important question, as every e-krona contains information about previous transactions and recipients.

As of today, there have been no decisions on whether an e-krona should be issued and what that would look like. The Riksbank are clear that this is technology that needs further investigations and the pilot is not the final solution that has been chosen as the digital currency.

Member comments

  1. Utterly pointless. Blockchain is a solution looking for a problem. Prepaid debit cards would allow people without bank accounts to use existing cashless payment systems, without creating another one.

    The difficulty of getting a PN is a separate issue and is a structural inequality in Sweden that should be fixed. But it’s too convenient for anti-immigration folks to use it as a way to make life difficult for non-Swedes.

    Strongly suspect this is all so the Riksbank can stay hip with the dudebros by using blockchain, yah

    1. I think the biggest point of using the blockchain here is to check whether ekrona that is being received was actually a valid token that was issued by the Riksbank and that it was acquired by the person before they send it off to somewhere else.

      At the moment banks do give us a notion of being cashless, but these banks are probably also working under the cover with the flow of actual cash (which again, is checked physically, whether they were printed by the Riksbank).

      I guess, as we do already have banks set up to handle our krona in digital form, we could expect the ekrona to replace what banks are currently doing under the hood with real krona bills?
      I think I’m trying to say, don’t expose this ekrona thing to the general public, just have the banks manage everything! And to the general public, keep life the way it is now?

    2. Thanks for your reply, Mark. As I finished reading, I wondered “how is this better than what already exists?” I don’t see the benefit for Sweden financially or to the Swedish economy. Agreed, re: structural inequality of obtaining a PN *and* agreed that as SD/anti-immigrant folks attempt to weaponize anything at their disposal (citizenship tests, for example) they seek to weaponize this, too.
      So, I don’t see this as easier/safer to manage than what already exists, I don’t see it improving the wealth of Swedes in general or the nation as a whole and I *do* see its potential to be weaponized by darker political/social forces in the country. *And* I have to wonder 1) who specifically is pushing for this and 2) how will they particularly benefit from it?

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For members

EUROPEAN UNION

Pensions in the EU: What you need to know if you’re moving country

Have you ever wondered what to do with your private pension plan when moving to another European country?

Pensions in the EU: What you need to know if you're moving country

This question will probably have caused some headaches. Fortunately a new private pension product meant to make things easier should soon become available under a new EU regulation that came into effect this week. 

The new pan-European personal pension product (PEPP) will allow savers to take their private pension with them if they move within the European Union.

EU rules so far allowed the aggregation of state pensions and the possibility to carry across borders occupational pensions, which are paid by employers. But the market of private pensions remained fragmented.

The new product is expected to benefit especially young people, who tend to move more frequently across borders, and the self-employed, who might not be covered by other pension schemes. 

According to a survey conducted in 16 countries by Insurance Europe, the organisation representing insurers in Brussels, 38 percent of Europeans do not save for retirement, with a proportion as high as 60 percent in Finland, 57 percent in Spain, 56 percent in France and 55 percent in Italy. 

The groups least likely to have a pension plan are women (42% versus 34% of men), unemployed people (67%), self-employed and part-time workers in the private sector (38%), divorced and singles (44% and 43% respectively), and 18-35 year olds (40%).

“As a complement to public pensions, PEPP caters for the needs of today’s younger generation and allows people to better plan and make provisions for the future,” EU Commissioner for Financial Services Mairead McGuinness said on March 22nd, when new EU rules came into effect. 

The scheme will also allow savers to sign up to a personal pension plan offered by a provider based in another EU country.

Who can sign up?

Under the EU regulation, anyone can sign up to a pan-European personal pension, regardless of their nationality or employment status. 

The scheme is open to people who are employed part-time or full-time, self-employed, in any form of “modern employment”, unemployed or in education. 

The condition is that they are resident in a country of the European Union, Norway, Iceland or Liechtenstein (the European Economic Area). The PEPP will not be available outside these countries, for instance in Switzerland. 

How does it work?

PEPP providers can offer a maximum of six investment options, including a basic one that is low-risk and safeguards the amount invested. The basic PEPP is the default option. Its fees are capped at 1 percent of the accumulated capital per year.

People who move to another EU country can continue to contribute to the same PEPP. Whenever a consumer changes the country of residence, the provider will open a new sub-account for that country. If the provider cannot offer such option, savers have the right to switch provider free of charge.  

As pension products are taxed differently in each state, the applicable taxation will be that of the country of residence and possible tax incentives will only apply to the relevant sub-account. 

Savers who move residence outside the EU cannot continue saving on their PEPP, but they can resume contributions if they return. They would also need to ask advice about the consequences of the move on the way their savings are taxed. 

Pensions can then be paid out in a different location from where the product was purchased. 

Where to start?

Pan-European personal pension products can be offered by authorised banks, insurance companies, pension funds and wealth management firms. 

They are regulated products that can be sold to consumers only after being approved by supervisory authorities. 

As the legislation came into effect this week, only now eligible providers can submit the application for the authorisation of their products. National authorities have then three months to make a decision. So it will still take some time before PEPPs become available on the market. 

When this will happen, the products and their features will be listed in the public register of the European Insurance and Occupational Pensions Authority (EIOPA). 

For more information:

https://www.eiopa.europa.eu/browse/regulation-and-policy/pan-european-personal-pension-product-pepp/consumer-oriented-faqs-pan_en 

https://www.eiopa.europa.eu/browse/regulation-and-policy/pan-european-personal-pension-product-pepp_en 

This article is published in cooperation with Europe Street News, a news outlet about citizens’ rights in the EU and the UK. 

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