Chapter 7

The State Steps onto the Chain

It began as a counter-movement. Bitcoin was born out of a distrust of banks and states, an attempt to create money that no central actor could control or switch off. A few years later, the same states and central banks are sitting discussing how to use parts of the same technology to create their own digital money – e-kronor, digital euros and other variants of state digital currencies.

The question is no longer whether the state comes onto the chain, but how and on what terms. And above all: what does it mean for your freedom, your privacy and your ability to decide over your own money?

What is a state digital currency, really?

To understand the shift, we must begin with something very basic: what is an e-krona or digital euro?

Today you in practice have three kinds of “money” in everyday life:

Cash – notes and coins, a direct claim on the state (the central bank).

Bank money – the figures in your account, a claim on your bank.

Any crypto – an asset outside the banking system, neither state debt nor bank debt.

A CBDC (Central Bank Digital Currency), such as the e-krona or digital euro, is intended as a third form of digital central bank money. It is to be:

Issued directly by the central bank.

Digital from the start (no physical counterpart).

Usable in everyday payments, roughly like Swish or cards – but with the central bank at the bottom.

Technically it can look several ways. Some main models:

Account-based: you have an account (either directly with the central bank or via your bank) where the balance is e-kronor. The system is then a kind of advanced, centralised account database.

Token-based: you hold digital “notes” (tokens) in a wallet, closer to how we think about crypto – but often still on a chain where only approved actors may validate transactions.

In every case, the point is: the state wants its own digital rails for money, not just to tax everyone else’s.

Why do central banks want onto the blockchain train?

There are several layers in the answer.

The first is purely practical. Cash usage is falling sharply in many countries. In Sweden, hardly anyone carries larger amounts of cash in their pocket any more. At the same time, almost all everyday payments rest on private banks’ infrastructure. If a major bank were to collapse, or a critical system were down for a long time, the state in practice has very little of its own operational infrastructure towards the citizen.

An e-krona or digital euro can then be seen as a kind of “digital reserve route”: a way for the central bank to:

Give all citizens access to central bank money in digital form.

Have its own robust payment infrastructure alongside the banks’.

The second layer is competition. When private actors issue stablecoins (digital dollars/euros) and tech giants experiment with their own payment systems, a worry arises: if enough people start using private “money”, the central banks’ ability to steer the economy can be undermined. A digital euro is partly an answer to that worry: “if anyone is to issue digital euros, it is us.”

The third layer is monetary policy and crisis management. With a digital central bank currency it would theoretically be possible to:

Send support directly to citizens’ wallets during crises, without going through banks.

Carry out more fine-grained operations (e.g. raising or lowering rates differently for different segments).

Here the technology becomes a new tool – for better and for worse.

How much “blockchain” is there, really?

When central banks talk about “using blockchain technology”, they seldom mean an open, permissionless chain like Bitcoin or Ethereum. Rather:

A distributed ledger system where a limited number of trusted actors (the central bank, major banks, authorities) run nodes.

Cryptographic signatures and hash chains are used for integrity, but new blocks are created only by approved nodes.

Access is tightly controlled; no anonymous mining, no unknown validators.

It is more like a consortium-run railway network than a free wilderness where anyone can lay their own rails.

Technically it may still resemble a blockchain – blocks, chain, signatures – but philosophically it is an entirely different species from Bitcoin. Where Bitcoin is built so that no one can switch off or own the network, a CBDC chain is often built so that certain parties can control and update the rules.

Freedom: new possibilities or prettier shackles?

From a citizen’s perspective, a state digital currency can entail both new possibilities and new risks.

On the positive side:

You can get direct access to central bank money without being dependent on a specific commercial bank. For those worried about the banking system’s stability, that can feel safe.

Payments can become cheaper and faster, especially across borders if central banks cooperate.

The state can use the system for swift and well-targeted crisis support: money straight into the wallet during a pandemic, without paper forms and intermediaries.

On the negative side:

Every transaction can in principle be traceable in real time, in a way that goes far beyond today’s account systems. Cash is anonymous; a CBDC normally is not.

In theory the state can control how the money may be used: time-limited support, money that is only valid in certain industries or areas, or harder blocking of certain recipients.

The possibility exists for a future government to use the system less carefully than originally intended.

That does not mean the e-krona automatically becomes a surveillance tool. But the technology makes it possible in a way that requires conscious safeguards – legal, technical and cultural – against misuse.

Control: the central bank’s dream tool

From a central bank and finance ministry perspective, a digital, programmable currency is to a high degree a control tool.

In an idealised model one could:

Increase the velocity of money by making it less attractive to “hoard” (e.g. via negative interest on large balances).

Target support extremely precisely: crisis cheques only to certain regions or industries, with automatic safeguards against double use.

Get almost immediate, aggregated data on how the economy reacts to political decisions.

This is the economist’s dream – and the privacy advocate’s nightmare. Because at the same time as it can make policy more precise, it also increases the possibility of using the economy as a steering instrument for goals other than purely economic ones.

Imagine two different worlds:

In the first, the tools are used to mitigate crises, reduce poverty, make the system more robust.

In the second, they are used to reward “desired” behaviour and punish “undesired” – perhaps not by the government that introduces the system, but by the one that takes over ten years later.

The technology makes no moral distinction. It only makes things possible.

Economic self-determination in a CBDC world

What does all this mean for you as an individual?

One key concept is economic self-determination – the feeling that the money in your account really is yours, that you largely decide where it lies and how it is used, within the bounds of the law.

With an e-krona or digital euro, several things can happen at once:

You can become less dependent on individual banks (good if you worry about bank collapses or oligopoly).

You can become more dependent on the state’s and the central bank’s policy decisions (less room to “step outside” the systems).

You can find it easier to take part in the digital economy if you previously stood outside it (e.g. if you have been “unwelcome” at banks).

At the same time, open cryptocurrencies will likely remain alongside. In a world of state digital currencies, Bitcoin and others may take on a clearer role as:

“Digital gold” – a store of value entirely outside state balances.

Alternative infrastructure for those who do not want to, or may not, use the state’s rails.

That opens a new field of tension: the state would like all important payment flows to go through its own or tightly regulated systems. Crypto enthusiasts want to keep the possibility of using open, permissionless networks. The conflict becomes not only technical, but political.

Three possible futures

Several directions can be imagined. Three clear scenarios:

Coexistence with clear safeguards

The state introduces the e-krona/digital euro, but:

A guarantee of some anonymity (e.g. small purchases up to a threshold).

Statutory limits on data storage and the ability to stop transactions.

Open crypto systems permitted and regulated, but not banned.

Here the CBDC becomes a complement rather than a weapon.

The soft control screw

The state digital currency becomes the norm. Cash is phased out “for reasons of efficiency”.

Surveillance is theoretically large but initially used cautiously.

Gradually more “smart money” functions are introduced: targeted support, subsidies, behavioural incentives.

Open cryptocurrencies are taxed harder, made administratively difficult, but not outright banned.

The loss of freedom is barely felt from year to year, but if you go back ten years the difference is greater than you thought.

Hard centralisation

The state digital currency is actively used as an instrument of stronger political and economic control.

Cash is gone; alternatives disappear or are banned.

Financial surveillance is dense, with a low threshold for blocking.

Access to certain services or benefits is tied to “creditworthiness” in a broad sense.

This is the scenario often raised as a warning – and which strongly motivates a conscious public debate before the systems are built.

Which of these we end up nearest depends not only on central banks and technology, but on legislation, public opinion and the kind of society we actually vote into being.

What can you as a citizen do?

This is not a development you are merely a spectator to. Some things lie within your control:

Build your own understanding. The better you understand the difference between bank money, state digital currencies and open crypto, the harder it is for anyone to sell you “magic solutions” without you seeing the flip side.

Diversify. Do not let all your economic lifelines lie in one and the same system. A mixture of traditional accounts, any state digital currencies, and a controlled exposure to open systems can give more freedom of action.

Take part in the debate. When consultations are issued on the e-krona, when the EU discusses privacy levels in the digital euro, when parties shape their line – then it is not only banks and lawyers who should be heard.

Be aware of trade-offs. Full anonymity and full crime-fighting cannot be had at the same time. Full central control and full individual freedom cannot be combined either. Be clear about what you consider an acceptable balance.

At the end of the day, the chapter is about the same technology – the blockchain, the distributed ledger – carrying two contradictory visions. In one, it is the tool for maximum freedom from central control. In the other, it is the foundation of the most fine-meshed economic control system humanity has ever built.

The future will likely be a mixture. But what that mixture looks like is decided not only by engineers and central bank governors, but also by how many understand what is at stake – and dare to ask the question: what kind of monetary system do we actually want to live in?