Sweden’s central bank, Riksbank, announced that the team behind their pilot e-krona blockchain project started the first phase of testing. The tests put Sweden in front of the central bank digital currency (CBDC) race, surpassing China’s digital yuan plans.
If the test results are a success, the next step would be gradually implementing the e-krona into circulation. Riksbank even noted that the new currency would be a perfect substitute in everyday banking – users can deposit, withdraw, pay for various services, and manage their funds through a dedicated wallet mobile app.
“The primary goal of the e-krona project is to show how Sweden’s citizen can utilize digital currencies,” Riksbank added.
The news comes just a month after Sweden’s Riksbank, alongside the European Central bank, and the national banks of Britain, Japan, and Switzerland announced cooperation for case studying CBDC implementation. However, Riksbank noted that unlike cryptocurrencies, relying on a decentralized ledger, CBDCs are government-issued digital representations of traditional fiat money.
Sweden’s CBDC tests come amid a sharp decline in fiat money usage and severe alternative currencies competition. For example, Facebook’s Libra project put enormous stress on regulatory authorities and central banks around the world. The competition led to central banks, taking into consideration the launch of native CBDC projects.
Riksbank assured its clients that the use of the e-krona would be as easy “as sending someone a text message.”
“The e-krona should be made simple to operate, with a user-friendly interface, but it also has to comply with the highest standards about security and performance. Apart from the mobile app, test users shall have the opportunity to make instant payments via wearable devices, such as smartwatches, wristbands, and cards. The whole e-krona ecosystem would rely on a distributed ledger technology (DLT), commonly knows as a blockchain. We will split the e-krona into two tiers: the first tier would receive the new tokens directly from Riksbank’s node, and the second tier would be end-users, which will receive the tokens from the participating partners.”, Riksbank clarified.
Sweden’s monetary policy resulted in the Scandinavian country being the least fiat-dependent country in the word. The current fiscal situation in Sweden provides the best scenario for testing CBDC and its effects on the population. Also, by using CDBC, Riskbank can reach those clients who don’t rely on fiat cash to live their lives.
Data shows that a mere 1% of the total GDP of Sweden exists in the form of fiat cash. In contrast, the Eurozone accounts for 11% of fiat cash in the GDP, The United States mark 8% fiat in their GDP, and Great Britain shows only 4% of fiat cash exist in the GDP mix.
In April 2019, Riksbank turned to lawmakers for legal tender concept reviews, as “the general public may end up without access to central bank money.
“If the current policies remain untouched, it would be a real difficulty for Riksbank to continue its plans for a safe and efficient payment system,” Riksbank commented.
The pilot project will be in a test phase for a year, but for now, Riksbank did not put any timeframe on when the CBDC would go live. However, Riksbank explicitly noted that there is still no firm decision on the faith of the e-krona project. The pilot will be used to gather vital insight about the CBDC, its flaws, as well as possible security issues. If necessary, the test phase may be expanded, including more vendors, as well as banks and end-users.