The country with the most cashless consumer transactions announced this week that it plans to test its own cryptocurrency “that can work as a complement to cash.” Sweden’s central bank, the Riksbank, stated it will be conducting a pilot project with Accenture to develop a proposal for an “e-krona” using Distributed Ledger (i.e., Blockchain) Technology (DLT).  

According to the Riksbank, “[t]he main reason that an e-krona has become so relevant is the sharp decrease in cash usage seen over the last decade,” which has “resulted in it becoming impossible to pay in cash in many places today.”  In fact, a 2018 Riksbank survey indicated only 13% of respondents made their most recent purchase in cash, down from 40% in 2010, and noted a continuing decline in cash withdrawals from banks and ATMs.

The pilot with Accenture will run for one year, through February 2021, with an option to extend up to a maximum of seven years. The project’s initial goal is to increase the Riksbank’s knowledge of how a central bank-issued digital krona would operate and could be used by the general public, although the project description already envisions a testing environment with digital wallets, a mobile app for transactions, and payments via wearables (e.g., smart watches) and cards.

The test environment will be a private network structured in two-tiers. In the first tier, the Riksbank will issue e-kronor to “participants” – namely, banks – which can obtain/redeem e-kronor against the debiting or crediting of reserves held in the Riksbank’s settlement system. In the second tier, the participant-banks will distribute e-kronor to end users who can make and receive payments via a mobile app or digital wallet.

The network will run on U.S.-based R3’s Corda platform. The Riksbank stated that Corda provides the benefits of a private network – meaning the Riksbank retains control over who can be a participant – as well as a less energy-consuming consensus mechanism than other popular models (e.g., Bitcoin’s proof-of-work).  

While certain crypto-purists may believe that a centralized cryptocurrency is antithetical to the purpose of DLT, increased recognition of DLT’s benefits and open-mindedness to its adoption are reasons for optimism.  For this reason, we say lycka till (good luck)!  

The Riksbank’s press release is available here, and its project description here.