As the European Central Bank (ECB) advances its digital euro plans, Sweden is revisiting a digital krona.

Sweden's Riksbank has advised lawmakers to prepare for a possible digital krona, citing concerns over foreign-currency stablecoins and the future of domestic payments.

Sweden's Riksbank has advised lawmakers to prepare for a possible digital krona, citing concerns about foreign currency stablecoins and the future of domestic payments.

Sweden's central bank is re-examining the possibility of introducing a digital krona, citing the European Central Bank's (ECB) move towards a digital euro and the growing use of stablecoins as reasons to rethink its central bank digital currency (CBDC).

In an Oct. 7 letter to parliament's finance committee published Thursday, the Riksbank urged lawmakers to begin legal preparations for a potential digital krona, three years after a government inquiry concluded there was insufficient demand for a digital krona.

The letter mentions the European Central Bank's planned digital euro pilot in 2027 and its possible public launch in 2029. Sweden's payment system could become less competitive without a comparable digital version of its currency, according to the Riksbank.

The central bank also identified the increased use of foreign currency stablecoins, particularly those linked to the US dollar, as a long-term concern, although it sees limited short-term risk.

"If stablecoins pegged to foreign currencies are seen as an attractive means of payment, the use of the Swedish krona may come under pressure even within Sweden's borders," the letter said.

The Riksbank estimates that the introduction of the digital krone will take at least five years, not including the time required for legal changes. For this reason, it recommends starting legal preparations now, even if Sweden eventually decides to launch a CBDC.