The Riksbank is looking at the possibility of issuing an e-krona as a digital counterpart to currency. The Riksbank would issue the e-krona, just like currency, and accessible to the whole population. There is yet to be a decision on giving an e-krona.

The e-krona is a digital version of the Swedish krona.

In today’s society, the usage of banknotes and coins is decreasing. Simultaneously, technical advancements in electronic money and payment mechanisms are accelerating. Sweden is now one of the nations with the fastest-growing digital payments.

The Riksbank is responsible for promoting a secure and efficient payment system. This duty may become more difficult in the future if most people and businesses abandon cash as a payment method. The Riksbank examines if a digital counterpart to currency, the e-krona, may be issued in response to cash’s increasingly marginalized position.

The e-krona initiative 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, analyzed technical solutions, and looked into the legal concerns that must be addressed to guarantee the Riksbank has a clear mandate to issue an e-krona.

Developing a technological 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, a project collaborating with Accenture to build a viable technological framework for the e-krona. 

The project’s goal is for Riksbank to understand better how a technology solution for the e-krona may operate. By putting this technological solution to the test, the Riksbank will learn more about its capabilities and use it as a reference point for other technical solutions and models for an eventual e-krona.

The e-krona project’s next stage

The Riksbank will continue to concentrate on the following issues in 2021:

The necessity for and consequences of an e-krona on the Swedish economy is being investigated.

Within the e-krona pilot, the technological solution for the e-krona is being tested.

Investigating if an e-krona might impact Swedish law and the Riksbank’s mission, and if so, how.

Different technological solutions and models for an e-krona are being compared.

The Riksbank will also begin planning for the prospective purchase of an issuable e-krona.

CBDCs are on the increase.

The potential introduction of Libra, a digital currency proposed by social media behemoth Facebook, piqued central banks’ interest in CBDCs. Many people believe that introducing such a currency would jeopardize central banks’ authority over money production, and as a result, they’ve begun looking at other digital options.

On the other hand, there’s the flip side of the coin.

Some countries are still skeptical that CBDCs are worthwhile. The National Bank of Ukraine found in 2018 that there was no actual benefit to launching a digital currency after testing one. It subsequently cautioned that CBDCs may represent a danger to the financial system: “If the majority of the population shifts to utilizing the central bank’s digital currency instead of cash and bank accounts, the banking sector may cease to be a key financial intermediary.” Indeed, there are concerns beyond financial inclusion: the BIS recently emphasized consumers’ propensity to convert electronic assets into cash during times of financial distress in a quarterly assessment.

“The biggest risk is that if cash is no longer widely accepted in the future, a catastrophic financial crisis might wreak even more devastation by interrupting day-to-day business and retail transactions,” the report said. The Swedish Civil Contingencies Agency now encourages everyone to store modest amounts of cash at home if the payment system fails. For the same reason, some experts suggest that Sweden should resist a complete transition to the e-krona — the Riksbank has previously said that the e-krona would complement, not replace, currency.

a European perspective

The e-krona pilot is expected to expire in February 2021, according to the Riksbank. More testing will be conducted depending on the project’s success. Therefore it will be many years before the world’s first CBDC is launched. But, more importantly, it’s no longer a matter of whether, but when, governments will implement CBDCs. The Bank of France has issued a request for proposals from companies interested in testing the usage of a digital euro for interbank settlements. In contrast, the Dutch central bank has said that it intends to take a “leading role” in the research and development of both its own CBDC and a digital euro.