Riksbank may not use DLT for e-kronor, says Julin

The Swedish central bank plans to launch a ‘proof of concept’ e-kronor next year as an alternative to cash; no monetary policy component envisaged

Sveriges Riksbank will take an agnostic view regarding the technology platform it may use to underpin its planned e-kronor central bank digital currency (CBDC).

The Swedish central bank is investigating the launch of a retail CBDC at a time when the use of cash in the Nordic nation is falling, with some retailers saying they plan to stop accepting it in the years ahead.

The Riksbank plans to start work on a pilot ‘proof-of-concept’ for a retail CBDC next year. To-date, no decision appears to have been reached for the technology likely to be used for the pilot or any subsequent launch.  

Despite the potential for distributed ledger technology (DLT) to underpin CBDCs, Eva Julin, deputy head of the general secretariat at the Riksbank, says it is important to be “neutral” when it comes to assessing accounting frameworks.

0:10 Is there any need for a retail CBDC?                               

1.05 What are the financial stability concerns?                       

2.23 Could banks handle stressed fund withdrawals?

2.38 What is the impact for monetary policy benefits?

3.40 What interest rate is offered?

4.02 What would the central bank do with deposits?

4.44 Does a retail CBDC need to be based on DLT?

5.22 Where do things stand for the e-kronor right now?

7.01 What are the steps and the scale of the pilot?

7.50 Will the pilot be conducted in the real world?

8.00 What is the reason for launching e-kronor?

8.28 What are the cost savings from a cashless society?

8.56 What happens to seigniorage?

“Since all kinds of techniques today are developing fast, we do not know what will be the proper technique to use in a CBDC in, say, five or 10 years. DLT is just one of many interesting techniques,” Julin said, speaking on the sidelines of Central Banking’s Fintech & Regtech Global Summit 2019 in Singapore. “It is very important to be neutral when it comes to techniques as it must be scalable and flexible.”

Julin stressed that – despite the weight of expectations – no decision has been taken by the Riksbank’s board actually to issue e-kronor. But the approach being investigated is to have a value-based central bank digital currency (CBDC).

This would act as a retail digital ‘wallet’ held with the central bank that would offer no interest. There are no current plans to use e-kronor as a transmission tool for monetary policy – for example by imposing negative rates on funds held with the central bank.

Julin says the Riksbank is not particularly worried about a substitution of funds away from commercial banks to e-kronor, at least in “in normal times”. “Of course, when it comes to stressed situations and financial surprises, maybe we will see a flight to security,” says Julin. “But maybe that is a good thing, that people can go to a safe place in those kinds of circumstances.”

Julin said Riksbank findings indicate there would “be minor problems” of deposits being pulled from commercial banks during a stressed environment, adding: “And of course they can always come to the central bank and lend from us.”

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