Digital Swedish krona (e-krona)

2020: The Central Bank of Sweden has investigated models for the introduction of state cryptocurrency

The Central Bank of Sweden studied the potential of four different models of state cryptocurrency for the local market and published the results of the study.

The Central Bank of Sweden in June prepared an economic review in which it described four models for presenting a digital version of the Swedish krona (e-krona). The four models considered by the Central Bank include the "centralized model e-krona without intermediaries," the "centralized model e-krona with intermediaries," "decentralized solutions e-krona with intermediaries" and the "synthetic e-krona"^[1].

"We found that all models have their advantages and disadvantages, but some better meet the current needs of the Swedish payment market than others," the review said.

A centralized model of electronic crown without intermediaries will allow the bank to take responsibility for the entire distribution chain. cryptocurrencies This scheme will open a completely new role for the bank, similar to that played by large retailers. banks The Central Bank of Sweden claims that under this model, the bank will have significant costs for personnel and customer support functions. At the same time, the Central Bank will become a competitor to private payment services at the retail level, which indirectly creates a market monopoly.

The centralized model with intermediaries is very similar to Sweden's current financial infrastructure in that it is based on a partnership between the central bank and private service providers. In it, the Central Bank of Sweden retains its role at the wholesale level of the payment market. However, in this example, the bank does not play an operational role in the distribution chain, as in the previous model.

Just as the centralized model described above works, in a decentralized environment, all intermediaries using the electronic crown will have direct contractual relations with the consumer.

"This model is a decentralized database of all electronic crowns in circulation, despite the fact that the Central Bank will check all transactions before their settlement," the document says.

The review says that the Central Bank of Sweden will have to develop a contingency plan if one or more intermediaries cease to perform their functions. In this case, the bank should be able to provide a large number of customers with payments through e-krona.

The last model considered in the economic review of the Central Bank was a synthetic electronic crown. The document explains that in addition to providing more institutions with access to real-time gross settlement systems (RTGS), "the model is mainly based on new legislation that will require banks to create separate accounts."

This model is very similar to the existing one, where the role of the Central Bank is to act as an intermediary of the payment system, and the private market is a secondary layer serving customers. For the private sector, "existing payment solutions can continue to work as they do today, without the need for additional equipment or investment."

"What makes synthetic e-krona attractive is its limited scale compared to the other models we described. This model will not entail large investments in infrastructure, and the Central Bank of Sweden may not take full responsibility for inspections of KYC, ALM, etc., "the document says.

The Central Bank of Sweden came to the conclusion that both a centralized and decentralized model with the participation of intermediaries, as well as a centralized model of electronic crown without intermediaries, will entail significant changes and investments. The review notes that the synthetic digital version of the Swedish crown may be viable, but it will not be classified as a state cryptocurrency.

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