Sweden has started to develop a digital currency, e-Krona, since the society in the country use less and less cash. At first, the e-Krona is going to be used alongside cash but might eventually be the only currency used, according to the Swedish news outlet Dagens Nyheter.
News broke yesterday that Sweden might be the first country to implement a digital currency, and the development is now underway. Several banks in Sweden no longer handle cash, according to Bloomberg, which is a problem for some groups of people who struggle to adapt to new technologies, such as the elderly. The central bank believes that a state-backed digital option is necessary to maintain the stability of the country’s financial system.
Even though some Swedes have been sceptical of the development of the e-krona, the bank has not slowed down in pushing the project. The digital currency will, at first, be used alongside cash but eventually become the primary financial instrument within Sweden.
The bank believes that without a faster development effort, private entities may have too much responsibility in the payments sector, which could lead to problems. Specifically, they want to avoid making private institutions “take all the responsibility for ensuring that payments function in crisis situations.”
The bank writes in their project plan:
“Recent years’ technological developments and the changes we can see in the payment patterns of the general public are opening up some questions concerning payments in the future and how best to take advantage of modern technology. Today, cash is used to an ever-decreasing extent in Sweden, which has led us within the world of central banking to start considering whether a digital complement to cash that is guaranteed by the state is needed so that we will be able to promote a safe and efficient payment system in the future too. As digital central bank money made available to the general public is a new and relatively unexplored area, we currently have no answers to all of the questions surrounding future payments and the role of an e-krona in this future world.”
The bank suggests that a pilot program should be in place in 2019 with full implementation by 2021. It is important to note that while the new currency might share characteristics with cryptocurrencies, it is still to be a fiat currency administered, owned, and regulated by a state entity, so its similarities are more with the existing fiat currency.
Riksbanken argues that an e-krona would give the general public access to a digital complement to cash that is guaranteed by the state and several payment services suppliers. By functioning independently from the infrastructure used by the commercial bank system, the e-krona system could also make the payment system more robust in the event of disruptions to, for instance, the system for card payments.
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