Central Bank of Norway Considers Launching Its Own Digital Currency
Norges Bank, Norway’s central bank, is contemplating developing its first digital currency to supplement traditional currencies. According to the working paper prepared by the bank, digital currencies are a ‘suitable legal tender’ that can be used to supplement cash.
The bank said it will continue to issue cash as long as there’s a demand for it in the market. But when the cash usage starts declining, CBDC (central bank digital currency) can prove to be a great alternative to deposit money. The authors of the paper have emphasized three main purposes CBDC could serve: a risk-free alternative to cash deposits in the bank, a legal tender to supplement cash, and a backup solution to more common electronic payment systems.
In addition to that, the Bank Governor Øystein Olsen wrote –
“A decline in cash usage has prompted us to think about whether at some future date a number of new attributes that are important for ensuring an efficient and robust payment system and confidence in the monetary system will be needed.”
So far, the bank has only conducted the initial phase of studying the potential outcomes of developing its own digital currency. The report stated:
“It is too early to conclude whether Norges Bank should take the initiative in introducing a CBDC. The impacts of a CBDC – and the socio-economic cost-benefit analysis – will depend on the specific design. The design, in turn, will depend on the purpose of introducing a CBDC.”
The bank has considered the possibility of crypto-assets becoming more attractive in future due to their low costs, user locations and processing capacity, but shares the view that cryptocurrencies still have a long way to go in outperforming robust centralized payment solutions.
Many other countries in Europe have also been considering developing their own digital currency through their central bank. A decline in cash usage has prompted Sweden’s Riksbank to consider developing an e-krona.