The E-krona and Traceability of Your Payment Data : An analysis of the fundamental differences and privacy-related impacts of the Riksbank’s e-krona pilot in comparison with card-based transactions

Abstract: The Riksbank is currently investigating the possibility of producing a Central Bank Digital Currency in Sweden, called “e-krona”, implemented through an “e-krona network” on a platform based on Distributed Ledger Technology. By applying the methodology of legal dogmatics, legal informatics, and a legal policy perspective, this thesis examines and analyses some of the fundamental differences in Sweden’s current payment system for transactions at the point of sale, comparing debit card-based transactions with payments using the model of the Riksbank’s e-krona pilot. This contribution will examine, in particular, technological, regulative and, democratic differences between the two payment systems. The thesis also aims to contribute and encourage a discussion on potential democracy-related impacts concerning traceability aspects of the end-users’ payment data in the e-krona pilot.     The examination of the e-krona technology reveals that the transactions are recorded in a distributed ledger and that the e-kronor in the network are represented by tokens, traceable to the Riksbank as issuer and delegated monitor of the system. Banks and other payment service providers act as participants in the e-krona network, responsible for providing the e-kronor to their customers through e-krona wallets. With respect to the payment system of card-based transactions, the paper concludes that individuals’ payment data is only traceable to a certain extent and that access to a transaction chain requires that information is collected among the multiple segmented private actors involved in the transaction. In the e-krona network, on the contrary, more information is shared between the participants, which enables traceability of the end-users payment data at a detailed level, providing access to full transaction chains by default. This thesis furthermore argues that the e-krona system does not comply with current legal frameworks protecting the payment data of individuals and that legislative changes may be required to ensure compliance. Lastly, given the means of current and future technology, the thesis also concludes that the traceability aspects, especially concerning the fact that all transactions will be traceable to the Riksbank, may enable the possibility of governmental misuse of the e-krona system, which could impact the privacy of the end-users and threaten democratic values. Given the limited scope of materials regarding the e-krona pilot project and the insufficient documentation available on public websites, the thesis required more profound research. Thus, to substantiate the conclusions of the complex technology, additional material was requested from the Riksbank, including an interview with a CBDC security expert.