Swedish central bank extends digital currency project

Sweden’s central bank, Riksbank, has extended a project to build an understanding of how a digital currency might work, including what technology might underpin it.

Riksbank’s project, which started in 2017, has been extended to February next year.

Accenture was hired last year to build a technology platform for the e-krona pilot as part of its investigation.

It is early days and nothing is certain, according to the central bank, which said: “There is currently no decision on issuing an e-krona, how an e-krona might be designed or what technology might be used.”

The work with Accenture will pilot-test payment, deposit and transfer capabilities for a digital e-krona. There will be trials of users being able to hold e-krona in a digital wallet and conduct standard transactions such as payments, deposits and money withdrawals using a mobile app.

“The main aim of the pilot is for the Riksbank to increase its knowledge of a central bank-issued digital Krona,” said a statement from the central bank.

“The aim for the coming year is to continue developing the technical solution, with the focus on performance, scalability, testing of off-line functions and bringing external participants into the test environment.”

On a global scale Sweden is relatively advanced in investigating the potential use of digital currencies by central banks. It is also one of the countries furthest along the journey to potentially becoming a cashless society.

Sweden and fellow Nordic country Norway are often cited as the countries closest to becoming cashless, and the Covid-19 pandemic might have accelerated the journey.

In fact, the Swedish Retail and Wholesale Council has forecast that 50% of its high street store members do not plan to accept cash as a method of payment after 2025.

The move away from cash has accelerated during the Covid-19 pandemic. Due to the risk of spreading Covid-19 through contact, the use of cash has reduced dramatically across the world wherever there are alternatives.

Once people get used to using alternative payment methods such as mobile wallets and contactless cards, they are unlikely to go back to cash.

In Norway, a survey by central bank Norges Bank revealed that less than 4% of spending in the country was made using cash in the autumn months this past year.

The Nordic countries could pioneer new payment methods as well as potential digital currencies. It is often seen as a testbed for new technologies and there is a rich fintech ecosystem in the Nordics, which has developed partly because of the openness of people in the region to new digital payment methods.