Norway: “no acute need” for digital krone

The bank is conducting research, but will not be pursuing implementation yet

The deputy governor of the Norges Bank, Ida Wolden Bache, revealed that the central bank of Norway has been looking into the use of central bank digital currencies (CBDCs) for close to four years. However, Wolden Bache also clarified that the apex bank was not in a hurry to develop a digital krone.

Wolden Bache was speaking at Finance Norway’s Payment Conference, which was held on the 5th of November. She explained that the research into CBDCs was motivated by the decline in cash usage as well as a need to take precautions. While more people in the country are looking at adopting new payment methods, they are steadily moving away from cash. This trend has skyrocketed further as a result of the coronavirus pandemic.

The results from a payments survey that was carried out in October 2020 indicated that cash payments in Norway only made up four per cent of the total transaction methods used. While there appears to be a preference for digital forms of payments, Wolden Bache highlighted some important attributes of cash and raised some questions on the possible introduction of CBDCs.

“The question is whether something important will be lost if cash dies out and we do not introduce CBDC? Is the central bank money crucial to confidence in the monetary system? Could CBDC provide more than cash can offer, in the form of a greater range of uses and more innovation”? the bank executive asked.

Wolden Bache added that the development of a CBDC has the potential to cause a significant change in the country’s financial system, and called for adjustments to the country’s Central Bank Act.

She revealed that the research on the possibilities of developing a national digital currency is currently in its third stage, which will be completed by 2021. The executive said that the government is currently looking into the technical aspects as well as the modalities for putting a digital krone under experimentation and trial.

The apex bank is also observing how CBDC projects conducted by other central banks are playing out.

Aside from Norway, Sweden is also working on the development of its own CBDC project, which the country has named the e-krona. Both countries are experiencing a decline in the use of cash.

While the governor of the central bank of Sweden, Stefan Ingves, has expressed his support for the launch of the e-krona, the country’s central bank is yet to decide on the issuance of a CBDC.