Who needs a CBDC?
FAROS Institutional Investors Forum
Frankfurt, 15 November 2018
Kerstin af Jochnick
First Deputy Governor
Payments – the basis of all economic activity
Confidence in money
Promote a safe & efficientpayment system
Monetary policy
Financialstability
Why central banks were
created
Without confidence: risk
for economic collapse
Money has been adjusted to new technology and needs throughout history
Government moneyPrivate money
Government currency
Demographicsmoney Government
electroniccurrency
Digitalisation affects everyone – CBDCs are now being analysed in many countries
Several factors are pushing developments towards a cashless society
New technology and innovation
New consumption patterns Demographics
Unchanged or increasing demand for cash after the financial crisis - not in Sweden
Source: Bech et al. (2018)
% of GDP
Fewer and fewer people in Sweden are paying in cash
Note. Questionnaire responses. Percentage who paid for their most recent purchase in cash.
Source: The Riksbank
What happens if the Riksbank does not react to the developments?
• Risk for a decline in the trust in the Swedish monetary system
• Groups who cannot manage digital technology risk financial exclusion
• The robustness of the payment system will decline
• Developments governed only by private profit incentives
An e-krona: the concept• A Swedish krona in an account or stored locally, e.g. card/app
• Underlying register traceability
• Instant payments
• Offline functionality, re. regulatory framework
• Non-interest-bearing to begin with
• Anonymous payments for value-based e-krona up to SEK 1 000
• Mandate for value-based e-krona
The e-krona makes the payment system more stable and inclusive
Conclusions of the second e-krona report:
• Continued state presence
• Increased resilience, preparedness and competition
• Payment services for vulnerable groups
Limited effects of an e-krona in normal times
…on the Riksbank's balance sheet;
…the implementation of monetary policy;
…and on financial stability
• A project to create room for manoeuvre
• Basis: The Riksbank’s current mandate value-based e-krona
• Aim: develop one or more proposals for technical solutions for an e-krona
• Timeframe: 2019 -2020
An e-krona pilot: build and test technical solutions
Possible to make use of both new and older technology when developing an e-krona?
• Not appropriate to develop an e-krona based on current versions of the distributed ledger technology
• Future potential – cannot rule out a DLT solution
• Interaction with DLT solutions important
Crypto asset properties not comparable with the e-krona
High transaction cost Poor store of value
Note. USD, average transaction cost for Bitcoin. Note. USD, value development for various crypto-assets (USD). Source: Coinmarket CapSource: Blockchain info
Thank you!
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