The Riksbank, Sweden’s central bank, has announced the launch of a year-long pilot project of its proposal for e-krona , a currency that will use distributed ledger technology inspired by the blockchains that run cryptocurrencies. like bitcoin.
In this way, Sweden could become the first country in the world without cash , according to a study that predicts that in 2023 cash transactions will account for less than 7% of the total and businesses will stop accepting it.
However, the purpose of this pilot project is to increase the knowledge of what would happen if there was a digital crown issued by the central bank, so there is still no decision on the date of issuance of the e-krona, or how it could be design or what technology could be used to manage it.
Cashless in Sweden
In Sweden, almost all citizens already use a mobile payment app called Swish , and it is estimated that retailers could stop accepting cash by 2023. This concerns the country’s central bankers for two reasons.
First, they fear that if the payment infrastructure is completely handed over to the private sector, certain groups could be left out. Second, if people lose the ability to convert what is in their bank accounts into a form of government-backed “cash,” it could undermine their faith in the monetary system .
For that reason, a few years ago, the Riksbank began investigating the possibility of a state-backed digital currency that could play a role similar to that currently played by physical cash.
The unstoppable digitization of money is challenging. According to Riksbank economist Gabriel Söderberg , while private companies are motivated by profit, the central bank would focus on delivering a public good focused on making a digital payment system that is user-friendly and accessible to all.
The pilot project will run until the end of February 2021. But it is not the only initiative in this regard. Its Norwegian neighbors are also moving fast: Last April, Jon Nicolaisen , Deputy Governor of the Central Bank of Norway, explained that the physical format was hardly used in business transactions anymore: “According to our latest figures, we have less than a 3% of cash; less than 10% of transactions, including the purchase of coffees, are made in cash. “
The central question is who will develop and control the electronic payment systems of the future. Most of the existing ones, such as Alipay, Zelle, PayPal, Venmo or M-Pesa, are run by private companies. For this reason, many governments are seeking to develop some type of electronic substitute for banknotes and coins. Meanwhile, proponents of stateless and ownerless cryptocurrencies like Bitcoin argue that these are the only surveillance-proof solution like cash .
We tend to take for granted that new technologies work better than old ones, but with cash there is a paradox: it is a technology that is already thousands of years old but has not yet been updated to a more advanced version. Sweden, for its part, wants to finally change this inertia .
