Sweden's Riksbank has begun testing an electronic krona in conjunction with consultancy Accenture, which could lead to the creation of world’s first central bank digital currency (CBDC), reported Reuters. The pilot will run until February 2021 and will use blockchain technology, the Riksbank said.
Riksbank said the aim of the testing is to show how an e-krona could be used by the general public. Making payments in e-krona would be as easy as sending a text, the Riksbank said, according to the news agency.
The Riksbank said the pilot would simulate e-krona use in an “isolated test environment”. If the e-krona eventually comes into circulation, it will be used to simulate everyday banking activities, such as payments, deposits and withdrawals from a digital wallet such as a mobile phone application.
The Riksbank said in a statement that it would use Distributed Ledger Technology (DLT) for the system. Simulated users in the test environment will be able to make payments via wearable items such as smart watches, as well as by cards. They will hold e-kronor in a digital wallet and make payments, deposits and withdrawals via a mobile app.
Reuters said that Sweden is the least cash-dependent country in the world, making it a litmus test for how central banks can react to people using less of the money they print. Only 1 percent of Swedish GDP existed in banknotes in 2018, Riksbank data shows, compared with 11 percent in the euro zone, 8 percent in the US and 4 percent in the UK.
In April 2019, the Riksbank asked parliament to review the concept of legal tender and its role as a central bank in a digital economy. This revised role in the payments system could lead to individuals holding money in Riksbank accounts, said Reuters, which would overhaul the distinction between central and commercial banks.
In January, the central banks of the UK, the Euro zone, Japan, Sweden and Switzerland joined forces to assess the case for issuing CBDCs. CBDCs are issued and governed by a country’s central bank. They differ from cryptocurrencies such as bitcoin, which are produced by solving complex maths puzzles, and governed by disparate online communities instead of a centralised body, said Reuters.
The news coincides with communications regulator PTS declaring that there were 46 state-financed payment service arbitrators in fourteen counties in 2019, which provide facilities for cash withdrawals, deposits for cash including businesses'daily takings, and bill payments. This, said PTS, meant that approximately 53,000 people had to travel an average of 19 km less to their nearest cash facility.
