Are Cryptocurrencies the Future of Money? : Whether a Transition to Cryptocurrency, as National Currency of Sweden, Would be Possible and What it Would Imply for the Swedish Society

Abstract: The underlying technology of cryptocurrencies is a broadly discussed subject. In Sweden, a growing interest for digital assets and payment methods can be observed. The fact that this coincides with an increasing acceptance for cryptocurrencies creates interesting possibilities. Some claim that cryptocurrency could be the future mean of payment. The objective of this report is therefore to examine whether a cryptocurrency could replace the Swedish krona, and what such a transition would imply for the Swedish society. To deliver a thorough analysis, the delimitation to exemplify with the cryptocurrency bitcoin and its protocol was made. Primarily, a literature study was conducted to determine the protocol’s structure, security and usability, as well as its possibility to fulfil the functions of the Swedish krona. In addition, an interview with Björn Segendorf at the Riksbank was held, in order to obtain the Riksbank’s interest and standpoint in the questions of matter. A transition to cryptocurrency is associated with both advantages and disadvantages. The infrastructure behind Bitcoin creates a possibility to process certain payments more time and cost efficiently, and simultaneously provides open and decentralized participation as well as increased payer integrity. However, the Bitcoin protocol has limitations that should be considered and dealt with before a transition should be initialized. The large energy consumption required to process transactions could be considered the largest obstacle for Bitcoin’s further growth. There are also security concerns, that could affect users of the protocol, that should be considered. Sweden fulfils the technical prerequisites for Bitcoin, and any other cryptocurrency with similar structure. However, a cryptocurrency does not fulfil the functions of a traditional currency. A transition to cryptocurrency would also affect the Riksbank’s possibility to conduct monetary policies. Following, the report concludes that a complete transition to cryptocurrency in Sweden seems unfavourable as of today. Cryptocurrencies are likely to grow continuously, and gain new market shares, but will coexist with traditional currencies and payment systems. It is not unlikely that a transition to cryptocurrency will occur in the future, when the market has matured, and solutions to problems highlighted in this report have been presented.