Why does Sweden want to have the e-krona digital currency?
The Central Bank of Sweden (Riksbanken) wants to have its own digital currency (e-krona) and published on April 6 a report on a pilot project.
Since 2017, the e-krona project has been launched and is scheduled to start preparations for a public procurement process in 2021.
First of all, the use of cash in Sweden is declining.
This is partly due to technological developments, which have been provided by various digital payment services.
But the Riksbank sees potential problems stemming from the decline in cash and is therefore running a project to investigate the possibility of producing a digital supplement to cash, which it calls e-krona.
The report in question briefly describes the technical solution tested in the first phase of the e-krona pilot project and the legal analyzes of the solution.
There is also an account of the general lessons learned from the project and the next step in the work.
However, no decision has so far been made on the issuance of an e-krona or on how the e-krona would be designed and what technology would be used.
The Riksbank is tasked with promoting a secure and efficient payment mechanism and since 1904 has had a monopoly on the issuance of Swedish banknotes.
Currently, cash is the only money issued by central banks available to the general public.
However, technological advances have made physical cash less used, while digital payment services are becoming increasingly popular.
When cash has to take a back seat in favor of the digital services of private financial agents, this means that the direct role of the Riksbank in the payments market is reduced.
Thus, the Riksbank may find it more difficult to fulfill its task of promoting a secure and efficient payment system available to all sectors of society.
Therefore, since 2017, the Riksbank has been working to investigate what role it should play in an increasingly digitized world, and whether there may be reasons for the Riksbank to produce a digital currency as a supplement to physical cash.
According to the Riksbank, the digital currency pilot uses distributed ledger technology (blockchain technology) to support the e-krona, and the Riksbank manages it together with technology solutions company Accenture.