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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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MONEY

How you can lower the monthly cost of your Swedish mortgage

It’s no secret that mortgages in Sweden have become more expensive over the last year or so, as interest rates have risen following high inflation. But did you know there’s a way you can lower your monthly mortgage cost?

How you can lower the monthly cost of your Swedish mortgage

Essentially, when you take out a loan in Sweden, the government gives you a discount on the interest you pay, in the form of a tax rebate.

This doesn’t include interest paid on all types of loans – for example, student loans are not included – but it does include your mortgage.

In order to qualify for the discount, referred to as ränteavdrag (interest deduction) or skatteavdrag (tax deduction), you need to fulfil some requirements: 

  • You’ve paid income tax and at least 1,000 kronor in interest in the last taxation year
  • You have a capital deficit (meaning that your interest costs must be greater than any capital income you’ve earned through interest or dividends)
  • You are either partly or wholly responsible for the loan or mortgage in question

If there are two of you who are both named on the mortgage who fulfil these requirements, you’ll each receive 50 percent of the total tax rebate.

The interest deduction is automatically subtracted from your yearly tax and listed in your yearly declaration, if you fulfil the requirements, meaning you’re likely to get it back as a lump sum when tax season rolls around in April.

How much do I get?

The actual sum you get back varies depending on how much tax and interest you’ve paid during the year, but there are some general calculations which can give you a guideline of what you might get.

You’ll get 30 percent of your interest costs back on the first 100,000 kronor you pay in interest over a year, and 21 percent on anything over 100,000 kronor. 

If there are two of you, you each have your own individual tax deduction, even if you’re paying the same loan, so as a pair you’ll get back 30 percent on the first 200,000 kronor, as well as 21 percent on anything over this figure.

To figure out how much you’ll get, you need to first find out how much interest you’ve paid during the year your declaration covers and subtract this figure from your capital income earned through interest or dividends.

If your figure is negative, that means you can subtract this figure from your tax paid during the year. Bear in mind that if you owe tax, then your interest deduction amount will be used to pay it back first, lowering the total amount you receive.

You can also change the proportion of the deduction applied to each partner if you share a mortgage, dividing it 60/40 or 70/30, for example, if you don’t share the mortgage 50/50. You can do this through your bank or by manually changing the figures in your tax declaration.

I don’t understand. How does this make my monthly mortgage payments cheaper?

Here’s where something called skattejämkning comes in. This literally translates as “tax equalisation”, and it’s a way you can spread your tax rebate for interest costs out over a year, lowering your mortgage costs each month rather than of getting a lump sum in the form of a tax rebate during tax declaration season.

In order to equalise your tax, you’ll need to contact the Tax Agency directly, filling out a form with the catchy title of SKV 4302 – Jämkning (ändring av preliminär A-skatt) or using their Jämkning online service.

To do this, you’ll need to have in-depth figures on things like your salary, pension payments, sick pay and any other income like unemployment benefit or maternity or paternity payments, as well as capital income and any business income for the tax year you’re applying for, as well as your expected income for the rest of the year.

If your application is accepted, the Tax Agency will tell your employer to subtract less tax from your payslip each month, effectively meaning that you get your tax rebate for interest costs back in your monthly pay instead of getting it paid out all at once.

Bear in mind that if you do go down this route it’s important that your calculations are correct. If you accidentally overestimate your interest payments or underestimate your tax owed, you could end up being hit with a hefty tax bill once your declaration comes through.

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