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Swedish Central Banker thinks that cash will disappear

Published by Karl Martin Karus in category Precious metals on 20.09.2022
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At the end of June this year, there was an annual event organized by the European Central Bank, held in Sintra, Portugal.

ECB Forum brings together central bank governors, academics, financial market representatives, journalists, and others to exchange views on current policy issues and discuss the Forum’s key topic from a longer-term perspective.

Sweden was represented by Cecilia Skingsley, who represents Sveriges Riksbank on the Committee on Payments and Market Infrastructures and the Euro Retail Payments Board. She is also the Governor of Sveriges Riksbank’s alternate on the General Council of the European Central Bank. She is a member of the Advisory Technical Committee of the European Systemic Risk Board.

Cash days are almost over

According to a central banker from Sweden, a central bank digital currency (CBDC) is “an investment” to protect the current fiat monetary system, and cash will soon be obsolete.

Cecilia Skingsley, First Deputy Governor of Sveriges Riksbank, stated at the European Central Bank’s (ECB) Forum on Central Banking in Portugal that central banks must develop CBDCs to meet public demand with modern-day developments.

“I see it as an evolution of the central bank role rather than a revolution,” Skingsley said, adding that the days of paying for goods and services with cash are numbered.

Modernizing Central Banking

Ulrich Bindseil, the ECB’s Director General for Market Infrastructure and Payments, agreed with Skingsley, saying that “there is no reason” for central banks not to embrace digitalization.

The ECB official said that efficient and reliable payment methods are “the foundation of modern society” and that CBDCs will play a vital role in this.

Privacy is still a key issue for CBDC

ECB has published a “Study on the New Digital Payment Methods “where privacy concerns have also been highlighted. A fully anonymous digital currency would raise “serious problems, “says the internal policy paper.

Fabio Panetta, the ECB-s board member, has discarded the concerns over state snooping. He said “there is no commercial interest in the use of this data” and “will respect until the last comma” privacy laws – unlike, he suggested, companies that are just looking to make a profit.

He also argued about how much privacy to provide – such as whether to offer carve-outs that allow small payments to remain secret and offline. He stated that it should be decided by governments and lawmakers rather than central bankers, claiming that “privacy… is not a technical issue; this is a political issue.”

On the other hand, Marina Niforos, an affiliate professor at the business school HEC Paris, rejects Panetta-s claim that privacy concerns are related only to profit-driven, commercial use of data. She said people would be right to worry about governments amassing so much control over data.

“We’ve seen, in other jurisdictions, a sovereign concentrating that kind of power may not only be for a benign purpose,” said Niforos, a crypto tech expert who has previously contributed to the EU Blockchain Observatory on the digital euro’s design.

State actors “have less commercial motivations, but that doesn’t mean that there’s not a danger of misappropriation and misuse of that data,” she said.

And in reality, privacy controls can’t just be added when policymakers want them to be added. Privacy controls depend on the kind of technology that is picked.

Distributed blockchain technology “might ultimately be the only solution left, in terms of being able to embed privacy by design” into the digital euro, Niforos said.

Swedish e-Krona

Sweden’s central bank, Riksbank, established a new division to investigate the use of digital currencies in Sweden in 2019. Its “e-krona division” is in charge of researching technical solutions for a digital complement to cash and related regulatory issues.

Phase #1

Riksbank contracted Accenture in February 2020 to provide a technical solution to be piloted in a closed test environment. Riksbank tested the system with simulated participants (banks), end-users, and payment instruments. Phase one ended in April 2021, and the Riksbank approved an extension of the pilot into phase two.

Phase #2

The second phase of the e-krona pilot project began in February 2021. The goal of the work was to continue investigating and testing the project’s technical solution and to look into a potential legal framework surrounding the e-krona.

During Phase 2, technical tests included determining whether and how an e-krona could operate offline, whether the tested solution’s performance is adequate, and how banks and other payment service providers could be integrated into an e-krona network. The latter was put through its paces in collaboration with Handelsbanken and Tietoevry.

The tests have shown, for example, that it is possible to integrate a potential e-krona into the banks’ current internal systems, allowing their customers to exchange money in their bank account for e-kronor and vice versa. The technical solution’s tests also revealed that it would be possible to conduct transactions using e-krona even when not connected to the internet. On the other hand, offline payments carry some risks that must be managed if a similar solution becomes a reality.

Phase #3

“In phase 3, we will begin to formulate a basis for the requirements for an e-krona if a decision is made to issue it. All the tests, analyses, and investigations will form a base for this work. We will also draw on experience from the rapid international development that is now taking place in this field,” says Mithra Sundberg, Head of the E-krona Division.

In addition, the project will consult with technology providers and solicit feedback from various parties in the payment market and the general public.

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