Is Sweden Set to Launch a Cryptocurrency?

Cryptocurrency is not just for diehards anymore. Its rising ubiquity around the world means increased attention for the entire cryptocurrency ecosystem, placing digital currencies firmly in government regulatory crosshairs. But it also piqued curiosity in bureaucratic circles – and seems to be encouraging innovation. Sweden recently announced their intention to create a state-backed digital currency, joining a growing list of governments to broach the subject.

Countries like the UK, Ecuador, Estonia, Russia, Senegal, and more have begun exploring their own state-backed cryptocurrencies, but only one has officially launched as the declared primary currency of the state – the Venezuelan Petro. The eye-popping inflation of that country’s paper currency, the Bolivar, led an increasingly-desperate government to create the digital offering, backed by Venezuela’s massive oil reserves. It pre-mined the 2.7 billion petro coins itself and has been releasing them in more limited quantities for investment. While there have been questions about which blockchain the petro operates on (supposedly NEM and not Ethereum, as originally stated in its whitepaper), the amount raised on the first day of pre-sale – Nicolas Maduro, the country’s president, listed the figure at $735 million without citing evidence – and the very validity of the project, there are reportedly 123 countries interested in investing (including China).

Sweden’s economic situation is far more positive, making the eKrona a different beast. The nation’s central bank, the Riksbank, launched an inquiry in March 2017 investigating the potential effects of a digital currency in a society that is rapidly moving away cash and coin payments. Digital payments have increased significantly in Sweden in recent years, to the point that cash payments in retail have declined from 40% in 2010 to roughly 15% in 2016. Virtual currencies and other payment methods have seen rapid technological development over that time, making them an increasingly viable, large-scale payment option.

Rather than an entirely new currency, the eKrona would likely function as an electronic complement to the country’s physical currency, the Krona. The bank remains concerned that country’s payment market, which consists of a small number of commercial actors and services, could “restrict competitiveness” in the market and “make society vulnerable” – a cashless society would leave little opportunity to save, making the payment system “sensitive to shocks” that could jeopardize economic security.  

No official decisions have been made on the eKrona, but the possibility of a safe, efficient cashless payment system for smaller payments between consumers, businesses, and authorities remains intriguing to the Swedish government and lawmakers around the world. The first wave of government-backed cryptocurrencies is happening – with potentially exciting results.