Swedish central bank in new report: Here is why we need a state-backed digital currency

Swedish central bank in new report: Here is why we need a state-backed digital currency.

Image source: Shutterstock / Wikimedia Commons

Tim Haldorsson

tim.haldorsson@trijo.co

According to a new report from the Swedish central bank, one can not expect the private companies currently controlling the majority of the payment systems to take all responsibility in a financial crisis situation. Now, the central bank takes the next step to make Sweden one of the first countries in the world to issue a national state-backed digital currency.

For more than 350 years, the Swedish central bank has provided Swedes with physical cash in Swedish crowns (SEK). Nowadays, when cash has become more unusual, the control over the payment system has more and more been centralized around a few private companies – the banks and the payment service companies.

Now, a new report from the Swedish national bank has come to the conclusion that Sweden should create a digital version of the Swedish crown (SEK) that is guaranteed and backed by the government. The report states that it is important that there is a payment system that is government guaranteed.

Controlled today by private companies

The Swedish central bank writes in the report that today’s payment system is controlled by a small group of private companies – the banks and the payment service companies. Unless the central bank can offer an alternative to these private companies, there is a risk that people, in the long run, will lose the basic trust in the Swedish money system, the central bank writes in the report.

“The private companies can not be expected to take the full responsibility for payments in crisis situations”, the central bank writes in the report.

“We want to create a digital currency”

The report further proposes that they now proceed by designing a technical solution for a digital Swedish crown. Then they should test which solutions are working and are possible to implement.

“We want to build a digital Swedish crown and test it technically”, said Eva Julin, team leader for the digital currency project, at a press meeting, according to the Swedish news site, Dagens Nyheter.

Stay in an account with the central bank

A digital crown could be “value-based or account-based”, that is, the digital crowns (SEK) could be kept on an account with the central bank (account-based) or saved locally on, for example, a bank card or mobile app (value-based).

The central bank also wants to make proposals for new laws that need to be changed both to give a mandate to the Swedish central bank and to review the legal status of a digital crown, the central bank writes in the report.

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