Danish central bank says 'no' to e-crown

COPENHAGEN (Reuters) - Introducing a digital version of the Danish crown currency would pose risks to financial stability without improving payment solutions for Danes, the central bank said on Friday.

A waitress poses with some coins in front of a cash-box of Danish crowns in a pub in Copenhagen, January 22, 2015. REUTERS/Fabian Bimmer

Its view contrasts with the Riksbank in neighboring Sweden, which said last year it may become the first big central bank to create its own digital money as the use of cash declines.

“(A) central bank digital currency would present challenges to financial stability and would not provide any new opportunities for monetary policy,” the Danish central bank said in a statement.

“In a Danish context, it is unclear what central bank digital currency would be able to contribute that is not already covered by the current payment solutions.”

Digital currencies allow users to make online transactions across borders instantaneously and have surged in popularity this year because of their eye-watering price rises. Bitcoin, the best-known, has increased in price by more than 1,700 percent since the start of the year.

Decentralized digital currencies like bitcoin are still not widely accepted, however, and critics say they can easily be used for money laundering and that the fact that they are unregulated makes them risky to use -- hence the idea of an “e-” version of a physical currency that still has a central controlling authority.

Danes use cash in 23 percent of in-store buys compared to an average of 79 percent in euro zone countries.

Issuing e-crowns would also make the central bank a retail bank for households and businesses and make the central bank a “direct competitor to the commercial banks”, it said.

Denmark is home to Scandinavia's largest payments service provider Nets NETS.CO which is in the process of being taken over by U.S. private equity firm Hellman & Friedman.

The Bank of England is also looking at the merits of introducing a digital currency for use by businesses and households.

The Bank for International Settlements (BIS) said in September it was too soon to determine whether central banks should issue their own cryptocurrencies, as the risks could not yet be fully assessed and the technology underpinning them is still unproven.

Reporting by Stine Jacobsen; Additional reporting by Jemima Kelly; Editing by Catherine Evans