Sweden’s central bank governor Stefan Ingves stated that Bitcoin is unlikely to continue escaping regulatory oversight as it responds to Bitcoin’s growing popularity.
The growing popularity of Bitcoin has led the governor of Sweden’s central bank to state that the peer-to-peer digital cash system is unlikely to continue escaping regulatory oversight, reported Bloomberg.
“When something gets big enough, things like consumer interests and money laundering come into play,” Riksbank Governor Stefan Ingves told Bloomberg on Monday. “So there’s good reason to believe that [regulation] will happen.”
The form such regulation will take is unclear. However, Sweden’s financial markets minister Asa Lindhagen also joined the conversation, pointing out that the government is in the process of tightening standards for bitcoin and other cryptocurrencies exchanges –– which she called a “work in progress at the international level,” according to Bloomberg.
Lindhagen also highlighted the government’s concern with bitcoin and other cryptocurrencies being used for money laundering, something she sees as a “very important issue” that will require cross-border work. Additionally, the head of Sweden’s financial regulator Erik Thedeen commented that “it’s quite evident that some form of regulation is needed.”
Sweden’s coordinated attempt to regulate Bitcoin becomes clearer when their fiat currency plans for the future are brought to light. The Nordic country is one of the more advanced countries globally to develop a central bank digital currency (CBDC), as Ingves stated in April that Sweden could have a CBDC within five years. Such a move would likely end cash, and the Swedish government does not want bitcoin filling in the void.
Although Sweden can attempt to regulate Bitcoin, the country is unlikely to succeed. Being a decentralized, global, peer-to-peer monetary network, Bitcoin was built to circumvent the scrutiny of national authorities and therefore cannot be entirely restricted. Countries can only regulate the edges of the system, i.e., exchanges and banks that operate around it, but that wouldn’t stop citizens from interacting with and leveraging Bitcoin –– as Nigeria has recently shown.
The Governor of Sweden’s central bank says that cryptocurrencies are now “big enough” to be regulated.
Many central bank officials around the world have recently aired concerns over the growth of Bitcoin and other digital assets.
The U.S. also appears to be looking into crypto regulation and the potential launch of its own CBDC.
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The Riksbank Governor says that regulation is coming to crypto.
Riksbank Governor Expects Crypto Regulation
The governor of Sweden’s central bank thinks that crypto will be regulated.
Speaking to Bloomberg, Stefan Ingves remarked that the recent growth of the space has increased the likelihood of regulation. He said:
“When something gets big enough, things like consumer interests and money laundering come into play. So there’s good reason to believe that [regulation] will happen.”
Ingves is one of the most senior officials at Sveriges Riksbank. He’s one of the key figures that would oversee Sweden’s regulation of cryptocurrencies, as well as the potential release of a central bank digital currency (CBDC).
Sweden is ahead of most of the world on the path to going cashless, with Ingves recently estimating that it could release its own CBDC in the next five years.
Ingves’ latest comments come as central bankers around the world have begun to acknowledge the rapid expansion of the cryptocurrency space. On Monday, it was revealed that one of the top officials at Ireland’s central bank had said that cryptocurrencies were a point “of great concern.”
That’s a sentiment shared by many other central bank officials. Governors at the Bank of England and Bank of Japan have also taken shots at the space in recent weeks, highlighting that digital assets are extremely volatile and have no intrinsic value.
Crypto Growth Attracts Attention
The rising prices of cryptocurrencies like Bitcoin and Ethereum have doubtless brought more attention from regulators in recent months. Both assets have hit record highs in recent weeks; they’re up 285% and 1,025% in the last year despite a big correction last month.
It’s not only Sweden that’s starting to take notice of crypto cementing its place in the mainstream. The Financial Times has reported that Michael Hsu, who took on the role of Acting Comptroller of the Currency May 10, is looking at setting up a “regulatory perimeter” for cryptocurrencies. He said:
“It really comes down to coordinating across the agencies. Just in talking to some of my peers, there is interest in coordinating a lot more of these things.”
Meanwhile, Jerome Powell recently suggested that the Federal Reserve would be looking into the potential release of a central bank digital currency. The Fed Chair recently announced the release of a paper discussing the technological developments in the global payments landscape, including cryptocurrencies. Any potential digital dollar would require consultation from the public and be“a complement to, and not a replacement of, cash,”he said.
Disclosure: At the time of writing, the author of this feature owned ETH, ETH2X-FLI, and several other cryptocurrencies.
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Swedish bank Riksbank is set to extend the pilot project for a central bank digital currency by a year. According to the bank, this enables more comprehensive consultation from professional services firms and ensures proper deployment of the digital currency.
More Developments Towards Digital Krona
Riksbank revealed this development in a press release on Friday, 12 February 2021. According to the bank, the digital Krona project will run until February 2022. Riksbank also revealed that it would continue to work on an alternative technical solution for the digital Krona as a supplement to cash.
According to the bank, this will lead to an increase in its knowledge of the technology powering the digital currency. The financial institution will also continue developing other products focused on improving its digital currency platform in terms of performance and scalability.
There are also plans to extend testing to offline functions and bring external participants to monitor test results. The world’s oldest bank recently suggested that the proposed e-krona should be open-based and not feature privacy. “As all CBDC payments involve a remote ledger, no CBDC can be genuinely peer-to-peer, offline and anonymous like cash.”
Concerns Remain About The Digital Krona
The development of the digital Krona has raised some concerns within the Swedish financial industry in recent months. Some industry experts have questioned the viability of a national digital currency and its effect on the existing banking system.
The lack of clarity over the issuance of the e-krona has also caused problems in recent months. Sweden’s central bank has been studying CBDCs for some time and has carried out significant testing that dates back more than a year. The Swedish government is yet to make a significant legislative move towards developing a digital currency despite intense pressure from the central bank in 2020.
However, there could be a change in sight following the effect of the coronavirus pandemic. There has been a reduction in the amount of traditional cash in circulation as more businesses move online amid the current movement restrictions.
It is understood that the Swedish government is mulling a move towards developing a digital currency as a potential solution. Nevertheless, there are still questions still regarding the design of the e-krona and the technology that will be deployed with it.
The world’s oldest central bank, Sweden’s Riksbank, is to extend its pilot project for a potential central bank digital currency (CBDC) for another 12 months.
According to a press release on Friday, the project, which is being carried out with assistance from professional services firm Accenture, will run until February 2022.
The Riksbank said it would continue developing a technical solution for a central bank-issued e-krona “as a complement to cash,” with the primary objective being for the bank to increase its knowledge around the technology.
For 2021, the institution will continue developing its potential digital currency offering with a focus on performance and scalability. Testing offline functions and bringing external participants into the test environment is also on the table.
There is no final decision over the issuance of the e-krona despite strong lobbying from the central bank to government last year. But with traditional cash seeing falling use, even more so during the coronavirus pandemic, Sweden has been mulling a switch to the CBDC.
However, questions still remain over the digital currency’s ultimate design and underlying technology, according to Friday’s release.
