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The Swedish national bank is looking in to digital currencies (CBDCs) for its local market.

Finaly some exciting news from Sweden. 

In a 96-page economic review, the Swedish central bank presents four models for possibly supplying a digital version of the Swedish krona (e-krona) as well as outlining how well the different models would fit its policy goals.

The four models under review include a “centralized e-krona provision without intermediaries,” “a centralized model with intermediaries,” “decentralized solutions with intermediaries” and “a synthetic e-krona.”

“We have seen that all models would have advantages and disadvantages, but some seem better at fulfilling the current needs of the Swedish payment market than others,” the review reads. 

A centralized e-krona provision without intermediaries would see the bank take responsibility for the whole distribution chain for the e-krona. This scenario, would mean a wholly new role for Riksbanken, more similar to how large retail banks operate.

Riksbanken claims that under this model it would illicit substantial costs for staffing and customer support functions for potentially millions of users while simultaneously acting as a competitor to private payment services at the retail level, therefore indirectly creating a market monopoly.

“Riksbanken may end up having too large a footprint in the payment market. It could also be possible to implement a small-scale version of this model where the Riksbanken would provide a basic supply of services that could, for instance, be catered to the needs of vulnerable groups.”

The centralized model with intermediaries closely resembles the current Swede financial infrastructure in that it is based on a partnership between the central bank and private service providers where Riksbanken maintains its prominent role at the wholesale level of the payment market. However, in this example the bank does not have an operational role in the distribution chain, as mentioned above.

“Technology is not a decisive factor in this model. Both a conventional account-based and a token-based e-krona are possible. A token-based model is where each digital e-krona is uniquely identifiable and would “essentially replicate the current cash distribution model but in digital format. The distinction between a token-based or account-based e-krona has no bearing on the potential implications of the e-krona on the monetary system by itself.”

In a similar way to how the centralized model above operates, in a decentralized setting all intermediaries involving the e-krona would possess a direct contractual relationship with the consumer. “This setup is simply a decentralized database of all e-kronor in circulation at any given moment, where the Riksbanken verifies all transactions before completion.”

The review suggests Riksbanken would need to provide a contingency plan if one or several intermediaries were to fail, the bank would then need to be able to provide a large number of customers with e-krona payments.

This differs slightly from the centralized model where Riksbanken has no contractual agreement with the consumer and the anti-money-laundering (AML), know-your-customer (KYC) and counter-terrorist-financing (CTF) policies would be the sole responsibility of the intermediaries.

The final modes presented in the economic review of CBDCs was the synthetic e-krona. The paper explains that aside from allowing more institutions access to the real-time gross settlement (RTGS) systems “the model consists mostly of new legislation that would require banks (and others) to set up segregated accounts.”

This model closely resembles the existing one, where the role of the central bank is to be an actor in the middle of the payment system with the private market acting as a secondary layer serving customers. For the private sector, “existing payment solutions could continue to operate as today with no need for additional hardware or investment.”

“What makes the Synthetic e-krona attractive is its limited scale compared to the other models that we have described. It would not involve major investment in infrastructure and the Riksbanken could renounce all responsibility for KYC, ALM etc,” the bank states.

The Riksbanken concludes that both the centralized and decentralized model featuring intermediaries, as well as the centralized e-krona provision without intermediaries, would incur substantial change and cost. A synthetic digital version of the Swedish krona, the paper says, could prove to be viable but may not even classify as a CBDC.

“Such a minimalistic approach might not achieve the goals of enhanced competition and resilience to the same extent since it would be quite similar to today’s system,” the review reads. “Furthermore, it would not be a direct claim on the Riksbanken, and therefore it is not clear if this should really be considered to be a CBDC.”

Riksbanken added that a lot of the modelling would need to be expanded upon in “many dimensions” in future studies.

Read the full report at:



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