Sweden aims to decide on whether to issue a digital currency called “ekrona” within two years, according to a Financial Times report.
Cecilia Skingsley, deputy governor of Sweden’s central bank Riksbank, told the Financial Times in an interview that the bank is considering the move after a dramatic drop in the usage of cash. The amount of notes and coins in circulation has fallen by 40% since 2009, with a rise in online shopping and card payments.
It has spurred the Riksbank to think about new ways of issuing money across Sweden. Skingsley told the FT: “This is as revolutionary as the paper note 300 years ago. What does it mean for monetary policy and financial stability? How do we design this: a rechargeable card, an app or another way?”
While banks are currently given access to electronic money by the central bank, if Sweden does choose to introduce the “ekrona” it would be the first time a major country in the world has given consumers direct access to virtual money issued by a central bank. (Riksbank was the first central bank in the world to issue paper notes, way back in the 1660s.)
While Sweden may be the first to issue digital currency, it is not the only country considering such a move. The UK Home Office told the Treasury earlier this year that there “might be a number of advantages of any digital currency for the UK being created and owned by central government.” Citi also told the government during the same consultation: “The greatest benefits of digital currencies can be realised through the government issuing a digital form of legal tender.”
Skingsley says the central bank is in the early stages of exploring the idea and is launching a project to explore various possibilities. Issues such as traceability, delivery method, and interest on e-money will all be examined. She also stressed that any “ekrona” would sit alongside coins and notes, rather than replacing them.
Bitcoin, the most famous digital currency, is built upon a database protocol known as blockchain, which has become the technological darling of commercial banks around the world in the last year.
The protocol allows strangers to digitally interact with each other directly, rather than working through a trusted intermediary such as a clearing house. This strips out cost and speeds the process up. The World Economic Forum thinks the technology “will fundamentally alter the way financial institutions do business around the world.”
However, Skingsley says blockchain is just one of several technologies that Riksbank will look at in relation to the “ekrona.”
Andrew Hauser, the Bank of England’s executive director for banking, payments, and financial resilience, told a conference earlier this year that Britain’s central bank is looking closely at the potential applications of blockchain technology in central banking.