‘Profound’ digital pound decision faces policymakers

Regulating new forms of payment

Central banks across the world are having to devise policies on the use of digital currencies, as consumers move away from cash as their main payment method. The pandemic accelerated the move to digital payments, which do not require as much physical contact and therefore reduce potential Covid-19 transmission.

Banks will need to create regulations to address a number of issues to ensure that society benefits from new ways of making payments. A Bank of England discussion paper, published in June 2021, stated that before new forms of digital money could be used widely, there were “issues around the safety of money and macroeconomic stability that need to be addressed”.

In Sweden, the central bank, Riksbank, is well into its second year of testing a new digital currency (e-krona), but so far, no firm decision has been made by the government to adopt it.

A year ago, Riksbank ended the second phase of its pilot project, which set out to investigate and test the technical solution as well as potential legal framework around the e-krona. This phase focused on integration with existing point-of-sale terminals and with the internal systems of commercial banks. Other areas of focus during phase two were offline functionality and improved performance and scalability.

With support from Swedish bank Handelsbanken and IT services company Tietoevry, the project looked at how banks and other payment service providers could be integrated into an e-krona network.

A Riksbank statement said: “The tests have shown that it is possible to integrate a potential e-krona into the internal systems the banks have today, and this would make it possible for their customers to exchange money in their bank account for e-krona, and vice versa.”