CBDC Cannot Perform Cash-like Features – World Oldest Central Bank
Sweden’s central bank, Riksbank, says digital currency has no cash-like attributes.
This is because the digital currency should be able to perform P2P transactions offline and anonymously.
CBDC Has No Cash-Like Features
Following a report from Bloomberg, Sweden’s Riksbank revealed that the CBDC has little or no propensity of performing similarly to cash. CBDC, central bank digital currency, is the digital form of a country’s fiat currency and is issued by the central bank. One major advantage of digital currency over traditional currency is the fact that it is riskless with regard to bank failure or crash.
According to the bank’s report, the ability of the digital currency to act as a substitute for cash will depend on how it is designed –whether it is going to be based on an account or tokens.
However, the central bank later argued that the design of the CBDC is in fact irrelevant in this case. This is because all payments involving the digital currency will require verification through a remote ledger. The Swedish bank explained further that for a digital currency to have similar attributes to cash, it has to be anonymous, able to perform P2P transactions and also function offline.
Swedish CBDC (E-Krona) Project Extended to Next Year
Late last year, the Riksbank had earlier stated that it was planning to switch the country to digital currency by launching its CBDC, e-krona. However, the proposal was met with concerns from Swedish bankers on how the issuance of the digital currency could destabilize the financial system and make banks unprofitable.
The Riksbank has been actively researching how the CBDC might function and what technology might be used on it. Last year, the bank launched a pilot for the digital currency to have a better understanding of how it will function. However, the bank has decided to extend the project till next year to focus on developing more technical solutions.