Researchers at Sweden’s central bank (Riksbank) working on a proof of concept for a digital currency (e-Krona) recommend the use of open source software, according to a working paper by the Bank for International Settlements (BIS) published in August.

The BIS working paper compares digital currency initiatives by the central banks of China, Sweden, and Canada. Describing the Swedish e-Krona project, “preference will be given to solutions built on open source code,” the paper says. BIS refers to a study by senior advisers working for the Riksbank, published in June.

The bankers outline their ideas for the e-Krona, which is intended as a complement to cash. They bank prefers an 'open architecture' (see 2018 report on the Riksbank’s e-krona project) but the researchers in June seem to be still undecided on the choice between proprietary or open source technology, listing weaknesses for both. (In the case of proprietary software: IT vendor lock-in, and for open source: the risk of the community being abandoned or the build-up of dependence on open source consultants.)

The BIS working paper was referred to by Christine Lagarde, President of the ECB, at an online conference on digital banking organised by the Deutsche Bundesbank on 10 September, where she raised the possibility of a digital Euro. “Introducing a digital Euro would allow the Eurosystem to be at the cutting edge of innovation,” Ms Lagarde said.

Digital Euro

The use of digital payment systems is growing across the EU, but Ms Lagarde warned that Europe is falling behind in the competition to deliver such systems. “This presents new risks of payment disruption – especially for jurisdictions that are overdependent on dominant system providers,” Ms Lagarde added.

Not having control over digital payment systems can expose users to protectionist policies, sanctions and exclusion. A digital Euro would also ensure that sovereign money remains at the core of European payment systems, she said.

According to the South China Morning Post, a Hong Kong-based newspaper, the central bank of China moving closer to a full roll-out of its sovereign digital currency.” A launch date is not known, the newspaper adds, but the bank has tested the currency in several cities including Suzhou, Chengdu, Xiongan and Shenzhen for most of last year.

More information:

E-Krona design models: pros, cons and trade-offs (PDF)
Speech by Christine Lagarde, President of the ECB, at the Deutsche Bundesbank
South China Morning Post news item