Sweden’s central bank is on a course to develop and road test its digital currency offering, e-krona, as it seeks to become a global leader in the fast-changing world of blockchain-technology–led currencies.
The architects behind the Riksbank’s e-krona project spoke to Fortune this week about their plans to pilot a digital version of the country’s storied currency. If the project proves successful, the digital currency will be added to the mix of other payment types already in place in the famously tech-savvy country, and will serve to protect the Swedish krona against the rise of decentralized cryptocurrencies.
“We want to update our offer when it comes to means-of-payment, and we want to find our role in this new world,” said Mithra Sundberg, head of the e-krona pilot division at Riksbank.
Sundberg is referring to the rise of cashless commerce that propels an increasing part of the global economy. From PayPal to Revolut to [hotlink]Apple[/hotlink] Pay, more and more payments are conducted electronically without notes and coins changing hands. Meanwhile, the booming rise in speculative cryptocurrencies—from Bitcoin to Ether—has attracted a new generation of crypto bulls who see the digital currency, based on blockchain technology, as the cash of the future. Central banks the world over are pushing back, hoping to gain a foothold in this market so as not to lose out to Big Tech. The e-krona is the latest such effort of an established central bank defending its currency and its monetary system.
“Our starting point is the rapid decline in cash, because cash is still the only state-guaranteed means of payment. Cash is declining, and the role of Riksbank in the payment market is decreasing as well,” Sundberg said.
If it gets the Swedish government’s go-ahead, the e-krona will be put into society alongside physical cash to act as a “supplement,” Sundberg added. It will not compete with mobile payment systems in Sweden.
A ‘political decision’
The timeline of any rollout is uncertain, as it relies on a parliamentary inquiry on the role of state in the payment market, which is due to be completed in November 2022. In the meantime, the Riksbank is taking the opportunity to refine its virtual currency offering so that it can be introduced as soon as the government makes a decision.
Sundberg noted that the future of the e-krona “will be a political decision.”
Other central banks may introduce digital currencies, but they are not competition. The team working on the project at Riksbank simply want to maintain the relevancy of their own currency and subsequently of their own central bank.
“If we don’t do this, the digital currencies from private companies will be the only alternative if cash disappears,” added technical project manager Micael Lindgren.
The total cost of the e-krona project is yet to be determined. So far, Riksbank has put 50 million kronor toward the technical research project every year since 2019.
This week Riksbank released findings from the first phase of its study, which simulated the e-krona in an isolated test environment using the blockchain technology of a private company. In the next phase of the study, participants will include commercial banks and other online payment services to test the e-krona in commercial and retail applications.
The Bank for International Settlements conducted a survey in January, finding that one-fifth of the world’s population are likely to issue their own digital currencies in the next three years.
China kicked off its own pilot scheme in February, handing out $30 each of its new digital currency to 50,000 Beijing residents.
The Bahamas has already introduced a digital “sand dollar,” a digital legal currency equivalent to the Bahamian dollar, with an accompanying mobile app.
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This story was originally featured on Fortune.com