Payments Report 2021

New opportunities and challenges with money in new forms

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Crypto currencies are difficult to use as payment

Published: 3 November 2021

In recent years, both the interest in and number of so-called crypto currencies has increased. There are now many different crypto currencies that are designed in different ways. Bitcoin, Ethereum and Cardano are some of the most known. The Riksbank considers the term crypto assets to be more appropriate for these, as they are currently used more for speculation than as money. We have nevertheless chosen the more familiar term of crypto currency in this report, to avoid any confusion as to what we mean.

So how do crypto currencies differ from national currencies such as the Swedish krona? The most important difference is that crypto currencies lack the institutional and legal framework that national currencies have. For money to function as a means of payment, it has to be safe and generally accepted by, for instance, households and retailers. In Sweden, the Riksbank’s inflation target, combined with stable banks and a safe and efficient financial infrastructure, create confidence in the krona. Sound public finances, well-balanced banking regulations with capital adequacy requirements, a deposit guarantee and consumer protection legislation all contribute to making the Swedish krona a well-functioning and stable currency. Crypto currencies have no state with this responsibility, and the price of a Bitcoin, for instance, varies substantially.

Price of Bitcoin varies substantially over time

Price of Bitcoin in USD

Figure: Price of Bitcoin varies substantially over time

The price of Bitcoin varies substantially over time and it has historically seen both large upturn and downturns. Download the data from the diagram by clicking on the arrow to the right, above the diagram. Source: Macrobond.