Counterfeit notes, off-the-books transactions, storing of black money in notes and coins and more — all crimes related to hard, paper cash. As digitalization continues to enter almost all aspects of our lives, cryptoassets are proving to be a safer and more viable option for our financial dealings. If handled properly, they certainly do have their own place in the global economy. Governments all over the world are having to accommodate cryptoasset dealings in their citizens’ daily lives. And in this race, Sweden is by far, leading.
Citizens of Sweden are already quite comfortable with cashless transactions. Reports have said that even street musicians and beggars are known to deal in cashless transactions. The people of Sweden use exclusively electronic payments now, rarely using cash payments. Thus, it is no surprise that Sweden will be the first country to introduce its own national cryptoasset — called ‘E-krona’.
Will Krona be replaced?
Rather than discrediting the national currency, E-krona will be used to supplement it. People will have the option of using whichever method of payment they feel comfortable with. In an economy where cash use is minimal, the central bank is stepping in with an alternative — a backup asset, should cash be no longer a feasible form of payment. Sweden’s Riks bank is extensively researching the viability of E-krona. It will not be introduced for the next couple of years, however, it is already predicted to be extremely popular.
However, we must look at the other side of the coin (pun unintended). If introduced, the cryptoasset must be used for both small and large transactions, otherwise, it may cause much inequality within the transactional procedures. Security is another issue, as we have seen with the occasional hacks. While these may be rare, and certainly unusual, however, if used nationally, can cause panic should the cryptoasset servers be hacked.
Regulation plans for E-krona
Speaking of systems, we haven’t yet spoken about regulation. One option is the register-based, peer-to-peer transaction system, as used in Bitcoin. The other is the value-based system, where points or credits can be added to a card which will act as an intermediary between the user and the database. The local government trusts the register based, blockchain system, as it is less prone to fraud and/or being stolen. While it would take a longer time to set up, it would be more beneficial in the longer run, analysts at Risbank said.
Emergence of E-krona certainly will bring about a change not only in Sweden’s but that of the world’s as well. Seeing how cryptoasset will be a form of monetary transaction trusted by a country’s government, other countries too, will have their own form of such asset. And who knows? We may soon be heading into a completely digitized financial system!