Sweden just found out that what they thought was a pioneering groundbreaking vision for a CBDC may actually take a little longer than expected to be enacted.
The Riksbank published today the results of the first phase of a pilot project into what is clearly the deepest exploration of a post-cash era that was ever realized by a major Western economy. It claims that the rapid pace at which cash is disappearing comes with “potential problems,” but that those problems can be addressed by a digital currency controlled by a central bank.
However, the task is enormous, and Sweden’s central bank, the oldest in the world, seems to continue to push back the timeline. Many years ago, it was suggesting that the e-krona would be ready by 2018. Three years later, Riksbank declares that the current pilot project won’t be ready until early 2022 and that it could continue trying until 2026.
Sweden is still more open to this than some other countries, such as the US. Regarding this matter, Jerome Powell, the Federal Reserve Chairman, declared that the US would rather be right than be first.
Mithra Sunberg, who is in charge of the Riksbank unit that is running the project from Stockholm, believes that it is very important not to settle on the technology before being sure what the digital currency needs to do. It was also announced that CBDCs won’t replace cash, and whatever is created will need a new legal framework so that it can be used.
Despite this, cash as it known now, as coins and banknotes, is being slowly, but surely, phased out. In 2020, Sweden had used less cash than the citizens of seven other “mature” markets, as a percentage of total transactions.
Of course, not everybody sees not using cash as often as a reason to start a digital currency project. In Norway, a country that is also slowly giving up on cash, the central bank declared that there is “no acute need” for introducing a digital currency.
Sundberg has also revealed that the e-krona pilot project has yet to analyze the monetary policy ramifications of such a transformation, but that she and her team have “looked at the technical possibilities of being able to charge interest.”
This serves as proof that it is possible to apply interest rates on a CBDC.
“The compatibility of an interest-bearing e-krona, positive or negative, with a distribution model as tested in phase one, is a much broader question than the purely technical possibilities and limitations,” the Riksbank declared.
Source: BNN Bloomberg