Sweden Wants to Assess the Viability of E-Krona for Smart Payments

Riksbank’s trials have demonstrated that offline payments utilising the CBDC are possible, but the central bank is also considering privacy concerns.

The Swedish central bank says it wants to investigate how a new e-krona may boost the growth of’smart payments,’ which some believe will be the future of money.
The Riksbank declared Wednesday’s experiments to merge state-backed digital money into traditional banking systems a success – but added that it was still studying claims about the potential benefits of the new technology.

The ability to programme or control transfers – such as triggering a payment when a contract is fulfilled or providing pocket money that cannot be used to purchase sweets – is mentioned as a potential benefit of central bank digital currency (CBDC), but Swedish officials want to investigate this further.

“Concepts such as programmable money, smart money, and smart payments are frequently touted as the payment system’s future, and this is used to justify the new technology,” the central bank stated in the paper.

Though no decision has been made on the design or issuing of an e-krona, the central bank stated that the next phase will “test and study how such solutions may be utilised to establish new payment services and why they would be more successful than more traditional technology.”

The report judged “effective” an experiment to integrate current intermediaries such as banks for the distribution of CBDCs to ordinary citizens, as well as off-line options in which the asset can be held locally on someone’s phone.

As with the European Central Bank (ECB), Sweden, which is a member of the European Union but does not use the euro, is considering whether to allow those offline payments – which could improve privacy but also introduce the same types of risks associated with cash, such as theft or the use of funds for illicit purposes.

Due to the fact that the pilot version of the e-krona verifies tokens using a transaction history, more data is shared between participants than would typically be the case, which means the concept may violate stringent privacy laws like as the EU’s General Data Protection Regulation (GDPR).

“Consultation with the Swedish and European Data Protection Authorities may be necessary to ascertain the extent to which a solution based on DLT/block chain technology complies with data protection legislation “According to the paper.

This pertains to a raging argument over whether cryptographic-style blockchain technology would enhance or impair user confidentiality.

According to Marina Niforos, Affiliate Professor at HEC Paris, blockchain “may eventually be the only solution remaining in terms of being able to include privacy by design” into a prospective new digital euro. Cryptographic procedures may be able to ensure that data is accessed only by those with a legitimate reason to see it, she added.

However, Hyun Song Shin of the Bank for International Settlements warned in a webinar on Wednesday that blockchain technology may also result in a free-for-all of payment data being made public.

In systems that make use of actual names, “we cannot use blockchains in the same way as cryptocurrencies do, because we do not want to publish all transactions publicly, allowing anyone to see what transactions someone did with whomever “As Shin stated.

 

Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.

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