Sveriges Riksbank, Sweden’s central bank, which also happens to be the oldest central bank in the world, plans to continue testing the practicability of launching e-krona. The authority unveiled this news via a press release on February 12, noting that it had extended the testing period of its CBDC for another year, ending February 2022. Reportedly, Sveriges Riksbank will continue to work with professional services firm Accenture in this pilot program.
According to the press release, this extension seeks to make the central bank more acquainted with the concept of a central bank-issued digital krona. For the next year, Sveriges Riksbank and Accenture purportedly aim to develop a technical solution for e-krona with a focus on improving performance and scalability. Apart from this, the duo also intends to test the off-line functions of the digital currency and introduce external parties into the test environment.
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While cash usage in Sweden continues dwindling, the central bank is yet to decide whether it will issue its CBDC in the long run.
Swedish banks face a dilemma
Reportedly, the idea of Sveriges Riksbank issuing e-krona does not sit well with Swedish bankers. According to the country’s bankers, a CBDC would encourage Swedes to move all their deposits from bank accounts into e-krona. In so doing, they would deprive banks of funding, leaving them dependant on wholesale markets for liquidity. Per Masih Yazdi, SEB’s CFO, a change this big could cripple the country’s banking sector, in turn impacting Sweden’s financial stability.
Apart from this, Yazdi noted that e-krona would tamper with areas beyond monetary policy, such as privacy. This is because e-krona transactions would be traceable whether Riksbank develops the CBDC on a blockchain network or not.
Yazdi added that,
If you have a bank account but you can – at the click of a button – move your money to the central bank … that could risk instability in the system.
However, Cecilia Skingsley, Riksbank’s Deputy Governor paid no attention to these concerns. Instead, she pointed out that Swedes had already started migrating from the banking system by purchasing treasury bills. In light of this, Skingsley noted that a CBDC could not introduce a significant threat to an already worsening situation.