It's not the first time Sweden is taking a look at Cryptocurrency. It's an advanced technologically country and rather an open minded, so to no surprise such concept were on the national forum for a while, but this time all the matters seems quite urgent. Why?
Cash use pummels
Recently, Riksbank - Swedish Central bank published a report in which it invites an idea of a national cryptocurrency "e-korona" as possible solution to drastic decline in use of physical cash.
Today, cash is used to an ever-decreasing extent in Sweden, which has led us within the world of central banking to start considering whether a digital complement to cash that is guaranteed by the state is needed so that we will be able to promote safe and efficient payment system in the future too. Consequently, in mid-March, we launched a project with the aim of investigating the need for a so-called e-krona and the possible consequences of introducing such a complement.
The idea seems like the most probable solution to 'the cash crysis' and eventually will completely replace present physical currency. In fact 2/3 of Swedish people claim they could already do without cash -mainly thanks to very popular in the country mobile payments and online transactions.
The proportion of cash payments in the retail sector has fallen from close to 40 per cent in 2010 to about 15 per cent in 2016. Two-thirds of consumers say they can manage without cash and just as many mostly use cards for payments under SEK 100. In the not-too-distant future, Sweden may become a society in which cash is no longer generally accepted.
E-Korona
The exact technology is still being reviewed but block-chain combined with some kind of central claim backing-up the value is the top candidate so far. Introducing distributed-ledger based currency would also reduce the cost and obsolete codding for apps and centralized software that currently runs transactions on the virtual money.
A cryptocurrency issued by a central bank can either be made available to a broad general public or limited to large and time-critical payments between banks. A cryptocurrency made available to the general public would mean that the new technology provided opportunities to make anonymous payments like cash payments but in digital form. If anonymity is not a decisive/desirable quality of the currency, the general public can instead be given access to accounts with the central bank to obtain access to cash in digital form. This is something that, although it has been technologically possible for some time, has not yet been introduced by any central bank. With regard to a cryptocurrency with access limited to banks, the new technology has the potential to increase efficiency and reduce settlement costs.
Four main characteristics surface out.
- The e-krona constitutes a direct claim on the Riksbank, is specified in Swedish kronor and can be held by the general public, financial institutions and companies. It is accessible in real time, 24 hours a day, seven days a week, 365 days a year.
- The e-krona does not accrue any interest, but should have a built-in function to make it possible to accrue interest at a later point.
- A register-based e-krona is combined with a value-based solution that makes offline payments of small amounts possible and increases their availability for groups that do not want to or cannot have e-krona accounts.
- The Riksbank provides the basic functions for the e-krona, but investigates the possibility of using the existing digital infrastructure and invites external actors to propose how the interaction with end-users should be designed.
Will the others follow?
Sweden is not the first country to get seriously interested in cryptocurrencies. China, Canada and Russia found their good reasons to take a proper look at the block-chain technology and it's national-use potential.
Sweden might be the first country to join the crypto-market officially and we should be excited, as their participation would greatly benefit the development of the technologies and cryptocurrency market value in general.
Hopefully the project will launch soon and many other countries will follow.