Sweden central bank Riksbank has started testing e-krona, moving one step closer to launching the world’s first central bank digital currency (CBDC).
Just like the regular fiat currency, if e-krona comes into circulation it will be used in everyday banking activities like deposits and withdrawals and payments from a digital wallet such as a mobile phone app, said the bank.
“The aim of the project is to show how an e-krona could be used by the general public,” the Riksbank said in a statement.
Interestingly, only 1% of Swedish GDP existed in banknotes in 2018 in comparison to 4% in Britain, 8% in the United States, and 11% in the eurozone.
Sweden is already the least cash-dependent country in the world, now they are assessing how the central bank can react to people using less of the money they print.
Making payments in e-krona will be “as easy as sending a text,” it says on the bank’s website.
However, it had not made any decision on whether they will be issuing e-krona and the pilot, being developed in collaboration with the consulting firm Accenture, would simulate the CBDC usage in an “isolated test environment.”
The pilot would run until Feb. 2021 and will use blockchain technology, the bank said.
Keeping it under control
Last year, in April, the Riksbank asked lawmakers to review the concept of legal tender and its role as a central bank in a digital economy.
“The general public no longer having access to any form of central bank money can make it more difficult for the Riksbank to promote a safe and efficient payment system,” the bank said at that time.
Earlier this year, the central bank of Sweden, Switzerland, Japan, Britain, and the eurozone joined forced to assess the case for issuing CBDCs, which are traditional money but in digital form.
Cryptocurrencies like Bitcoin, in comparison, have no centralized body that controls its rather online communities. The competition from private cryptos along with tech giants like Facebook coming up with their own digital currencies has prompted central banks around the world to consider issuing their own CBDCs.
China is already ahead in the race as it announced that it is ready with its digital yuan after five years of research. This along with Facebook’s Libra also prompted US Federal Reserve to jump on the central bank digital currency train.
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