Sweden Central Bank DLT: A safe way for digital currency adoption?
Most central banks shun away from the idea of distributed ledger technology (DLT), but Sweden Central Bank DLT will be used to test digital currency e-krona.
E-krona’s background is from R3 Corda and is generated by Accenture and is set to grow gradually. Trials on e-krona will be simulated until 2021 after which he is bound to decide on carrying on with the Sweden central bank DLT project.
Sveriges plan does not consider small banks but the digital ledger technology will be simulated from the framework of the closed network of the Central Bank. According to his news desk, Accenture is in its final testing stages.
Following aversion of Swedish people over cash, Sveriges sprung into action towards the efforts of creating a digital currency known as e-krona, although he was not crystal clear about the technology he could use to power e-krona.
Since the commencement of the project in 2017, DLT has been his choice of technology. Sveriges acknowledged the fact that the already existing technological methods that were centralized were more technically and resourcefully daunting.
He said that technically, in that particular moment he did not find any obstruction towards a solution like e-krona that was built on a centralized register, since the bank’s money transfer system RIX was built on a similar platform.
In 2017 Sveriges was not willing to gamble on a system that was referred to as troublesome, weak and previously not tested. These remarks were made by the bank because the technology was still new and major central banks in the world had not charted the path.
Sveriges seemed to have settled on the idea that the digital ledger transfer concerns had been solved by Corda. With the help of Bitcoin, Corda used much less energy with the ability for scaling up and also preventing clients from spending twice.
The new system would send e-krona to clients’ nodes then following with distributing e-krona to the merchants and customers as the end-users in the chain.
Clients would then accommodate e-krona in wallets that were digitized on their phones and that would make peer sending of money as easy as sending a text message. Sveriges would then become the only power to add new clients to the e-krona system.
Don Guo, the chief executive officer at Broctagon Fintech Group remarked that the process was far much centralized and the point of creating a digital currency for a bank was pointless.
Guo said that the major reason for the development of cryptocurrency was decentralization and therefore the bank should be keen on the advantages that decentralization brings on board or otherwise they would not find any meaningful benefit of the digital currency over fiat.
Pointing out that the roll-out of the Sweden Central Bank DLT would be marred by political decisions by the central bank, Sveriges reiterated that he had only set out to illustrate how a digital currency would work.
The project would also assist him to know how and when the issuance of digital currency would take place for the retail bankers in the republic of Sweden.
According to keynote speakers in the Ukraine summit on CBDCs, most central banks still held on to the idea of centralization to regulate and govern the system and the use of digital currency was still considered with hesitation.
The remarks follow incessant tests of DLT on the financial systems by the European banks for payments within each bank’s system. Therefore, key players in the banking sector have agreed that a solution through Digital Ledger Technology could not be overlooked in the long term.
Featured image by Pixabay
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