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What is money and what is the role of the state in the payments market?
Riksbank economists (Stefan Ingves, Eva Julin, Stefan Lindskog, Gabriel Söderberg, and David Vestin) discuss role of the state in the growing digital payments market. They compare digital cash to dematerialisation of physical cash:
In this article, we argue that the state should take its responsibility to ensure that future payment systems work well in a global digital world. Part of this responsibility is to ensure that Sweden issues digital central bank money, if money issued by the state is still to be widely available to the public.
Our conclusion is that the Riksbank should issue e-kronas within the next few years and that these e-kronas need to be usable by the public in everyday life. This is necessary to ensure that fundamental objectives for society, such as confidence in the monetary system, resilience, accessibility and competition can be safeguarded in the payments market in the future.
A regulatory framework is needed to enable the introduction of a new digital payment instrument and to set the scope for it. From a legal perspective, our analysis suggests that electronic central bank money in the form of electronic cash as a complement to physical cash is preferable to electronic central bank money in the form of claims on the state. In other words, this implies a dematerialisation of cash in the same way that paper shares have already been dematerialised into book-entry shares. The central bank is thus modernising the product it has been offering for hundreds of years with the help of new technology.