Record Little Cash in Sweden Prompts Security Warnings
According to experts, the uniquely low share of cash money in Sweden leaves the country more vulnerable to contingencies and hack attacks, prompting the authorities to explore alternative options such as digital currency.
The share of cash in Sweden's money supply has reached a historic low at SEK 62 billion ($7.2 billion), the lowest level measured, at merely 1.33 percent.
The sign “card payments only” has recently become a more common sight in more and more stores – not least as a side effect of the COVID-19 pandemic. In a survey from the Riksbank, Sweden's central bank, fewer than one in ten respondents stated admitted to using cash for their most recent purchase. Half of the respondents hadn't used cash at all in the past month.
Given the fact that the share of electronic money in use has, by contrast, risen to 99 percent, experts called the situation in Sweden unique, yet warned of the associated risks.
“What do we do if someone pulls the cord? Take the latest IT attack on Coop, for example, and imagine that a giant cyber attack on Sweden takes place. Should we then go back to a barter economy?” senior economist at the SEB bank Robert Bergqvist mused in an interview with the newspaper Svenska Dagbladet.
While Bergqvist called Sweden a leader in cash freedom and has repeatedly been described as en route to a cashless society, the recent IT attack on Coop in early July resulted in a major disruption, as the majority of the company's 800 stores scattered across Sweden could not accept card payments. The holdup went on for several days and Coop is estimated to have lost more than SEK 100 million ($11.6 million) in the debacle.
Earlier in spring, the Swedish Civil Contingencies Agency (MSB) recommended that its compatriots to keep cash at home in the event of a crisis.
A major study in the form of a game-like simulation funded by the authority indicated that a stop in card payments can have unexpected, far-reaching and serious consequences.
“MSB recommends individuals to have a sum of cash in minor denominations at home along with a stock of supplies. This increases the possibility of coping with, say, a longer disruption in the payment system. However, cash alone is not the only solution, but only a complement. The more alternative ways to pay you have as a private person, the better you will do,” MSB's website said.
The steady decline in cash use decreases the Riksbank's opportunities to influence the economy. Therefore, the possibility of introducing digital currency in the form of the so-called e-krona is now being studied. Earlier this year, a solution based on blockchain technology, the same system that cryptocurrencies are controlled by, was tested. The idea is that the Riksbank's e-krona can be used as a complement to cash.
However, economists see both opportunities and risks associated with the digital currency.
“It's a bit of a Pandora's box. There are many advantages: increased efficiency, simplicity and security, but at the same time it opens up for question marks, as it can create instability in the financial system”, Bergqvist warned.
Numerous countries across the globe have joined the race for e-currency, including China's digital yuan, the digital euro and “Britcoin”.