With the Danish central bank all set to turn over responsibility for minting the nation’s coins to Finland beginning in 2017, Denmark’s commitment to becoming cash-free seems as firm as ever. 80% of the country’s financial transactions are already being made using electronic payments, credit and debit cards, and other alternatives to physical currency. As Denmark’s reliance on cash continues to diminish, central bank Governor Lars Rohde has highlighted the bank’s interest in exploring the potential benefits of a blockchain-based e-currency that he refers to as the e-krone.
Denmark’s interest in issuing its own digital currency makes sense, given that the nation’s reliance on non-cash payments has reached the point where only about one-third of its actual money supply consists of physical notes and coins. If Denmark’s existing electronic payments infrastructure stops working for any reason, there isn’t enough physical currency to act as a safety net. As a result, disruptions in the existing payment system could quickly become a crisis, since cash couldn’t be relied upon to fill the payments void. In comments to Bloomberg, Rohde acknowledged as much when he said, “We’re way past that point. Cash and notes are not an alternative to electronic payments. We went beyond that many years ago.”
According to Rohde, the Danish central bank is giving strong consideration to the issuance of an e-krone digital currency. He has suggested that each of the digital coins could come with a serial number that would enable it to be traced on the blockchain. However, even that idea is no more than a suggestion at this point, since some consumers might object to that level of surveillance. Moreover, there are worries that a complete reliance on digital currency could end up forcing the central bank to do a bailout if a financial crisis strikes the nation. Right now, the only thing that seems certain is that Denmark is headed toward some sort of digital currency solution.