I would like to discuss the changes in the financial environment and how they affect our different areas of operation, but before I do so I shall talk about the Riksbank's main role in the financial system, namely to provide the Swedish economy with safe money that is easy and efficient to use. The Riksbank provides the economy with money that safe and simple to use Money is needed so that we can buy and sell goods and services. If we are to have confidence in money, and want to use it, it needs to be both safe and easy to use. This requires in turn financial stability, price stability and smoothly-functioning payment systems. Let me describe how the Riksbank tries to create the right conditions. If we start with money being safe, this means that one can rely on money representing a particular value in goods and services, and that it will retain this value until the day one wants to redeem it for goods and services. The pieces of paper that we issue have no value in themselves, but function as a form of evidence that someone has produced something of value. 2 In the academic literature there is, for instance, a branch known as ‘monetary economics’ or in its modern form, ‘new monetarist economics’ 3, which looks into why money arises and under what conditions it retains its value.
This relationship is not affected by whether or not there is an interest-bearing e-krona, as we would not introduce an e-krona to replace cash. A non-interest-bearing e-krona, on the other hand, would raise the lower bound for the policy rate to zero. This is because the e-krona would then function as cash with regard to alternative investment, but without the costs for storage, for instance, that large amounts of cash incur. Zero would therefore be a sharp boundary for the policy rate if there was unlimited access to a non-interest-bearing ekrona. But it is of course possible to implement other measures that counteract such a sharp boundary, such as limits as to how many e-krona one can hold or who is allowed to hold them. The potential impact of the e-krona on financial stability is a more complex question. A couple of years ago, it was fairly common to hear concern expressed over the risk that bank runs would increase when there was stress on the market and an attractive, risk-free alternative such as a digital central bank currency was available. However, there is research that shows why this need not be the case. 19 In general, I would say that within the central bank world this is no longer seen as a particularly large risk. On the other hand, there is still potential cause for concern if the e-krona were to become so large that in normal times it takes over large shares of the banks’ deposits from the general public.