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The e-Krona (digital krona) is a proposed electronic currency that the Riksbank can issue directly. It differs from electronic transfers using commercial bank money. Central bank money represents a claim on the central bank, which cannot go bankrupt, at least not for debts denominated in Swedish krona.

The decline in cash use in Sweden may be cyclically reinforced. As more businesses discover that they can operate successfully without accepting cash, the number of firms refusing to accept cash may rise. This emphasizes the importance of citizens downloading the Swish app, which is currently utilized by half of the population. Hundreds of cash machines, which are owned by a Swedish bank consortium, are being decommissioned, particularly in rural areas.

The Riksbank has yet to decide whether to issue e-krona. To begin, the Riksbank must look at a variety of technological, legal, and practical challenges. Due to the falling use of cash in Sweden, this is a more pressing issue for the Swedish Central bank as opposed to most other central banks. Although issuing an e-krona may appear straightforward at first appearance, it is a first-time endeavor for a central bank, and there is no precedent to follow. If the Riksbank decides to issue e-krona, it can be a supplement to cash, not a replacement. If there remains a demand for banknotes and coins, the Riksbank can continue to print them.

Per Bolund, Sweden’s Minister for Financial Markets, said in December 2020 that the government aims to conduct an assessment to determine the viability of shifting to a digital currency. The review is planned to be finished by the end of November 2022. The assessment is led by Anna Kinberg Batra, a former head of the Riksbank’s finance committee.

The E-krona Project of the Riksbank

In 2017, the Riksbank launched the e-krona project to assess the need for an electronic currency. The project team has met with several national and foreign agents to hear their perspectives on an e-krona. The team then analyzed technical solutions and investigated the legal concerns that must be addressed to guarantee the Riksbank has a clear mandate to issue an e-krona.

Developing a technical solution for the e-krona as part of the e-krona pilot.

The Riksbank began a more realistic phase of the e-krona initiative in 2020. To see how an e-krona may appear and work, the Riksbank launched the e-krona pilot. This is a project in collaboration with Accenture to build a viable technical framework for the e-krona. The project’s goal is for Riksbank to have a better understanding of how a technology solution for the e-krona might work. By putting this technical solution to the test, the Riksbank may be able to learn more about its capabilities. This may be used as a reference point for other technical solutions and models for an eventual e-krona.

The Riksbank’s pilot experiment demonstrates that interest rates can be applied to central bank digital currencies CBDCs, regardless of whether they are account-based or token-based. If a negative interest rate is to be used, the end-user can keep the tokens but not the key that allows them to be accessed.

The E-krona Project Has Progressed to the Next Step

In response to a fall in the use of the cash they issue, central banks around the world are considering creating central bank digital currencies (CBDCs) to speed up domestic and international payments.

Over the past year, the pilot has been examining different options for a publicly used e-krona in Sweden. The goal was to see how the e-krona could be used for both large and small transactions. The e-krona pilot has only been replicated within the Riksbank, but in the next phase of the trial, it can be expanded to include commercial banks.

According to a January 2021 survey by the Bank for International Settlements, one-fifth of the world’s population is likely to issue its digital currency in the next three years.

Many central banks regard central bank digital currencies (CBDCs) to keep public authority at the center of the payment system while fending off cryptocurrencies. The Riksbank stated that the prototype e-krona was based on a blockchain technology known as Distributed Ledger Technology. However, no final decision had been taken on the shape that a Swedish CBDC would take.

Sweden’s Political Choice on Whether to Create an e-Krona is Still being Investigated

The question of whether Sweden should establish a state-issued digital krona may have a broad impact on society, and the decision to do so may ultimately be a political one.

An investigation examining the government’s role in the payment market, as well as the need for central bank digital money, is now underway.

In the interim, the Riksbank is working on a “two-tier” arrangement that would oversee both the issuance and redemption of CBDCs. According to Micael Lindgren, technical project manager at the Riksbank, the so-called participants, such as banks or payment providers, would have direct interaction with the end-user under such a system.

Politicians may ultimately decide the future of money in Sweden. Lawmakers may decide whether the data collected as part of the pilot study convinces them that an e-krona is indeed essential. if it is deemed necessary lawmakers must determine what form it should take.

Fraudsters Who Use the Electronic Currency E-krona Are Being Warned

False information is circulating on certain websites and social media claiming that the Riksbank is selling e-kronas. Individuals have also contacted the Riksbank, reporting that they were contacted by companies purporting to be selling e-kronas on behalf of the Riksbank. However, the Riksbank has yet to decide whether to issue an e-krona, thus they are not available for purchase.

Final Thoughts

Today, the use of banknotes and coins is decreasing. Simultaneously, technological advancements in electronic money and payment mechanisms are accelerating. Sweden is currently one of the countries with the fastest-growing digital payments.

The Riksbank is responsible for promoting a secure and efficient payment system. This may become more difficult in the future if most people and businesses abandon cash as a payment method.

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