The Riksbank has published a new report recommending that the central bank advances a project to develop its own central bank digital currency (CBDC).
The report proposes that the bank begins to design a technical solution for an e-krona in order to test which solutions are practicable and realisable; draws up proposals for legislative amendments needed to clarify the Riksbank’s mandate and an e-krona’s legal standing; and continues investigating the financial aspects of an e-krona.
Sweden’s central bank says that while it has provided the general public with money for 350 years, as the use of cash is continuing to decline in Sweden, “we need to think in new ways”.
In the future, it says cash may be used to such a limited extent that it is difficult to pay with it. In response to this, the Riksbank started a project in the spring of 2017 to examine the scope for it to issue a CBDC, an e-krona.
“An e-krona could ensure that the general public will still have access to a state-guaranteed means of payment,” the Riksbank says. “Adopting a position on whether Sweden should introduce an e-krona will take time. But at the same time, the analysis work needs to continue to increase the Riksbank’s knowledge of the consequences of an e-krona and technological solutions need to be developed and tested.”
An e-krona can be described as Swedish krona that can either be held in an account at the Riksbank (account-based) or be stored locally, for example on a card or in a mobile phone app (value-based). A value-based e-krona is compatible with the Sveriges Riksbank Act, but the project assesses that to issue an account-based e-krona, the act would need to be amended. “The Riksbank should therefore begin an investigation that produced concrete proposals regarding what amendments need to be made to the Sveriges Riksbank Act,” it states. “However, it is up to the legislator to amend the act.”
The central bank adds, “Developing one or more possible technical solutions for an e-krona would provide the Riksbank with greater room for manoeuvre and knowledge prior to a decision on whether or not to issue an e-krona. A preliminary technical solution for the e-krona should focus on a value-based e-krona without interest and with traceable transactions.
“The Riksbank should also continue investigating an account-based e-krona which would require coordination with other authorities,” it continues. “It is reasonable that a system for an account-based e-krona is built in agreement and perhaps together with other authorities, say the Riksbank’s e-krona project team.”
Eva Julin, project manager of the Riksbank’s e-krona project, says, “The next step in the Riksbank’s work on the e-krona should be to build an e-krona to learn more and test which solutions are viable and possible to realise. A technical solution would provide the Riksbank with greater knowledge prior to a decision on whether or not to issue an e-krona.”