The Swedish government and its central bank have long been in the vanguard of the war on cash. Now they are suddenly having second thoughts about its potential outcome. The value of notes and coins in circulation has crashed to its lowest level since 1990 and now stands at 40% below its level in 2007. “No cash” signs are popping up everywhere in restaurants and retail establishments and even museums throughout Sweden. The rapid disappearance of cash is making the government very nervous. A parliamentary committee charged with reviewing central bank legislation is now preparing a special report on the situation to be released this summer. The head of the committee, Mats Dillen, was refreshingly candid in revealing the general concern of the committee:
One may get into a negative spiral which can threaten the cash infrastructure. It’s those types of issues we are looking more closely at.
In other words, many Swedes, especially the elderly, do not hold money that can be accessed and transferred electronically to make payments. These people are finding their exchange opportunities severely diminished in an increasingly cashless society.
The Riksbank, Sweden’s central bank, is also concerned about instability that may result from a transition to a completely cashless society. It is contemplating a proposal to introduce a digital currency, the e-krona, to complement, not displace, physical cash. Stefan Ingves, the Governor of the Riksbank, has even encouraged the government to consider legally compelling banks to pay out cash to customers. This is a far cry from the Rikbank’s attitude at the beginning of this decade when its deputy governor gloated that cash will survive “like the crocodile, even though it may be forced to see its habitat gradually cut back.”
In any case, Swedish policymakers’ second thoughts about the war on cash is good news for anyone who values the right to financial privacy and the right of depositors to drive fractional-reserve banks out business as soon as they lose confidence in them.
