Swedish Central Bank Research: Bitcoin Hasn't Affected the Economy

Bitcoin has not affected the stability of Sweden's economy, according to a new paper published by the country's central bank.

The latest issue of the Sveriges Riksbank Economic Review, published on 18th September, includes the article What is Bitcoin by Bjorn Segendorf, from the bank's Financial Stability Department.

Segendorf provides an overview of the bitcoin protocol, mining and price movements. He also includes a section analysing bitcoin use in Sweden and the currency's interactions with the Swedish krona.

According to Segendorf, retail payments using bitcoin in Sweden are likely to be few and far between. He uses the list of merchants on Bitcoin.se as an estimate, finding that there were 30 businesses accepting bitcoin in Sweden in mid-August.

"It is mainly a matter of small companies and bitcoin does not seem to have any broad acceptance as a commercial means of payment," he wrote.

Segendorf concludes that a large proportion of bitcoin transactions must therefore be taking place with receivers or senders outside Sweden.

Bitcoin-krona trading

Providing an analysis of bitcoin trading on exchanges involving the bitcoin-krona currency pair, Segendorf finds that 266,000 kronor (SEK) – approximately $37,000 or 91 BTC – is traded daily on average. Total trading in bitcoin-krona is about 2% of the bitcoin-euro trading volume and under 1% of bitcoin-dollar trades.

"The [krona] is thus a minor currency in a bitcoin context," Segendorf writes.

The paper notes that the spot market for kronor and dollars sees about 25bn SEK ($3.5bn) traded daily on average.

Segendorf also analyses bitcoin-krona trading volume on exchanges and its relationship to the wider Swedish economy. He finds exchange volume to be a poor indicator of "pure" bitcoin payment volumes, but concludes that the traded volumes are so low that they would not impact the Swedish payment system.

Households make payments worth 3bn SEK daily, the paper notes, concluding:

"Bitcoin has not had any measurable impact on the Swedish retail payment market or financial stability."

The paper also notes some of the risks and benefits associated with bitcoin. Among the benefits are bitcoin's decentralised design which contributes to a "more robust" payments system independent of traditional "infastructure hubs" and the low cost of bitcoin transactions.

Risks the paper identifies include bitcoin's high volatility, which could lead to instability if major financial organisations had substantial bitcoin holdings.

The central bank's Economic Review is published each quarter containing articles on "topics relevant to the Riksbank's field of operation". The research contained in it is not the official view of the Swedish central bank, according to the Riksbank's website.

Sweden is home to several notable bitcoin companies including ASIC maker KnCMiner and exchange Safello.

Featured image via Flickr / Guillaume Baviere