It appears that the idea of cashless societies is beginning to gain momentum, with Swedish authorities recently announcing plans to phase out its traditional krona and introduce a digital replacement. The latest move follows China’s digital currency pilot project, which is expected to be officially unveiled during the 2022 Winter Olympics, and is the first of its kind in world.
Last week, Sweden’s financial markets minister Per Bolund revealed the latest development to Bloomberg, noting that the transition to an e-krona could be completed as early as November 2022. Sweden, which is already considered to be one of the most cashless societies in the developed world, has been thus far been one of the major pioneers behind the transition of digital currencies into a national financial system.
Earlier in the year, Riksbank, the country’s central bank, begun a pilot project using an electronic version of the krona which was based on similar blockchain technology that digital currencies like Bitcoin are derived from. Once the review of the pilot project is completed, Sweden’s government will officially launch the new electronic krona. The use of paper currency in Sweden has been declining significantly, especially during the coronavirus pandemic. In fact, according to the Bank of International Settlement (BIS), Sweden was ranked as one of the most cashless societies in the world, with the country’s retailers projected to stop accepting fiat money by 2023.
However, the shift towards digital currencies carries some implications, especially since many countries are heavily reliant on the US dollar payment system when it comes to international transactions. Countries such as China, which are routinely subject to sanctions by the US, can bypass international financial systems that would otherwise be subject to US laws. This would certainly have ramifications for the US dollar, especially since countries like China and now Sweden could potentially persuade a new global standard of transactions.
As of current, the US dollar is the world’s hegemonic currency, meaning that the US government has the power to weaponize the dollar and use it to their advantage, while cutting off countries it doesn’t like. With the rise of digital currencies though, countries will have the freedom to diversify from the US dollar, and ultimately break its monopoly. The US dollar has already been on a downward decline since the onset of the pandemic, largely fueled by the country’s astronomical account deficit.
Information for this briefing was found via Bloomberg. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.