The Central Bank of Sweden announced on Tuesday that it would begin testing how its planned digital currency, the e-krona, may handle commercial and retail payments in the real world within the next year. The testing will involve the participation of banks.
As a response to a decrease in the use of the cash that they issue and as a means of speeding up domestic and international payments, central banks throughout the world are considering the establishment of central bank digital currencies (CBDCs), sometimes known as “CBDCs.”
The Riksbank the ekrona has stated that the e-krona pilot program would be expanded to include additional players, such as commercial banks, in the subsequent phase of the project. Until this point, the program has only been replicated internally at the Riksbank.
Which has run for a year, and has been running with the goal of testing out various designs for an e-krona that would be utilized publicly in Sweden.
Riksbank stated
The Riksbank stated that it could not yet confirm which banks or payment providers would assist in its next round of testing but that the goal of the testing was to analyze how the e-krona could use for both large commercial payments as well as modest retail payments.
The findings of a poll conducted by the Bank for International Settlements in January, the central banks that represent one-fifth of the world’s population are expected to issue their own digital currencies over the next three years.
This is seen by many central banks as a way to protect themselves from the threat posed by cryptocurrencies and to ensure that public authorities continue to play a role in the payment system.
Researching CBDCs is the furthest that the majority of central banks have gotten so far. The Bahamas is the only country to have successfully launched one, while China and Sweden are the only two countries to have commenced testing.
The Riksbank stated that its pilot electronic krona was based on a blockchain technology known as Distributed Ledger Technology but that there had been no final decision made regarding the eventual shape that a Swedish CBDC would take.
This week, the architects behind the Riksbank’s e-krona initiative spoke with Fortune about their ambitions to develop a digital version of the storied currency used in the country. In the event that the endeavor is fruitful, the digital currency will be added to the variety of other payment methods that are already in use in the well-known for its technological prowess nation, and it will serve to defend the Swedish krona against the growth of decentralized cryptocurrencies.
“We want to discover our place in this new world, and we want to update our offer when it comes to means of payment,” said Mithra Sundberg, head of the e-krona pilot division at Riksbank.
Sundberg
Sundberg is making a reference to the advent of cashless trade, which is driving an increasing portion of the economy all around the world. Electronic payment methods such as PayPal, Revolut, and Apple Pay are becoming increasingly widespread, and as a result, cash and coins are becoming increasingly obsolete. Meanwhile, the meteoric rise in the value of speculative cryptocurrencies such as Bitcoin and Ether has attracted a new generation of crypto bulls. These individuals believe that digital currency, which is based on blockchain technology, could one day replace traditional forms of cash.
Central banks around the world are beginning to fight back with the goal of gaining a footing in this market so that they do not fall behind Big Tech. The e-krona is the most recent example of an established central bank attempting to safeguard both its currency and its monetary system by initiatives of this kind.
A ‘political decision.’
The timetable for any implementation is currently unknown because it is dependent on a parliamentary probe on the role of the state in the payment sector, which is scheduled to be finished in November 2022. In the meantime, the Riksbank is seizing the opportunity to improve its provision of virtual money so that it can be implemented as soon as the government takes a decision about whether or not to allow it.
Sundberg made the observation that what will happen to the e-krona in the future “will be a political decision.”
It’s possible that other central banks will launch their own digital currencies, but these institutions are not competitors. The team at Riksbank that is working on the initiative has a straightforward goal: they want to ensure that their own currency, and by extension, their own central bank, remains relevant.
Micael Lindgren, a technical project manager, said that if this isn’t done, the only option to cash will be digital currencies issued by private corporations. “If we don’t accomplish this,” he said, “currency will become obsolete.”
It has not been decided how much money would be spent on the e-krona project overall. Since 2019, the Riksbank has contributed 50 million kronor to the research initiative for technological advancement on an annual basis.
This Monday, Riksbank announced the findings from the first phase of its study, which mimicked the e-krona in an isolated test environment using the blockchain technology of a private company. This phase of the study took place earlier this year. To assess the viability of the e-krona in commercial and retail settings, the participants in the project will expand to include commercial banks and other online payment providers in the next phase of the investigation.
According to the findings of a poll that was carried out by the Bank for International Settlements in the month of January, one-fifth of the population of the world is likely to issue their digital currencies within the next three years.
In February, China began its own trial program, which consisted of distributing $30 worth of its new digital currency to each of the 50,000 citizens of Beijing.
