Banking News

Sweden signals eCurrency intent with e-krona

(29 October 2018 - Europe) Sweden's central bank, the Riksbank, is proceeding with plans to set-up a technical framework for the issuance of a new electronic currency (eCurrency), labelled the “e-krona”.

The Riksbank commenced a project in 2017 to scope the creation of a central bank digital currency (CBDC), With cash usage falling in Sweden, the central bank says an electronic currency could ensure that the general public will still have access to a state-guaranteed means of payment. The Riskbank is proposing to begin to design a technical solution for an “e-krona” in order to test which solutions are practicable and possible to realise, draw up proposals for legislative amendments needed to clarify the Riksbank's mandate and an e-krona's legal standing and continue investigating the financial aspects of an e-krona.

The central bank envisages an electronic currency 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 recent poll of 21 central banks by IBM, found 38 percent are actively conducting researching and trialling CBDCs. But while most of the respondents believe central banks should be issuing their own CBDCs - with a particular emphasis on the wholesale interbank markets - there remains no clear consensus on the governance issues associated with digital fiat.

As reported in Banking News last week, The Reserve Bank of Australia (RBA) has pointed to the New Payments Platform and other methods of instant electronic payment as viable substitutes to sovereign issued digital currency, with Assistant RBA Governor Michele Bullock stating “Much like the conclusion of quite a few central banks around the world, there is actually no need for it (eCurrency) Cryptocurrency isn't currency. They're not currencies. You can't use them, typically, to make payments. They don't store value, and they're not a unit of account. The name's a misnomer to begin with. We don't really see a demand for it, we don't really see there's a need for us to get into that business. And there would be financial stability risks potentially if we did anyway, because that would mean that people could just run to the Reserve Bank and get electronic reserve bank dollars if they felt there were issues with a particular commercial bank,” she said.

"Adopting a position on whether Sweden should introduce an e-krona will take time," states the Riksbank. "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. 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," states the Bank. "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 is reasonable that a system for an account-based e-krona is built in agreement and perhaps together with other authorities.