Central Bank of Norway to Develop Digital Currency Following Decline in Cash Usage
Prompted by the decline in cash usage, Norges Bank, a central financial institution of Norway, is looking forward to developing its own cryptocurrency. As per Norges Bank’s recent report, dubbed the “Central Bank Digital Currency”(CBDC), plans to act as an alternative to fiat currency to “ensure confidence in money and monetary system.” Other central banks are also analyzing the possibility of creating a cryptocurrency.
Step in the Right Direction
The Norges Bank working group has presented a comprehensive report evaluating the parameters that should be assessed while considering the digital currency issuance. The CBDC report mainly focuses on three possibilities of implementation: First, it should act as an appendage for deposits in private banks. Second, to use it as legal tender instead of cash. Third, to make it work as an independent source of digital payments.
Regarding the report, Oystein Olsen, Norges Bank governor, stated, “A decline in cash usage had prompted us to think 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.”
The paper also highlights the fact that such digital currency can act as a trustworthy option for storage of assets. Furthermore, Norges Bank foresees an uninterrupted working of the bank’s, as well as other financial institutions’, capabilities to supply credit.
The working group has completed the primary phase of understanding the potential of a CBDC. The comprehensive report concludes the following:
“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.”
Similar Initiatives from Around the Globe
As an outcome of diminishing cash circulation, many central banks in other European countries are contemplating on the issuance of digital currencies. One notable outcome of this contemplation has been the “E-Krona” in Sweden.
The country is already a strong supporter of the idea of an advanced and modernized society, now sees a younger generation of Swedes motivated to use electronic payment methods. Owing to this, Sweden’s central bank, Riksbank, has come up with their digital currency, named the E-Krona. It is believed that these ‘“third generation coins” will hold the same value as traditional currency.
Similarly, the birth of digital currency of Venezuela, namely “Petro,” is thought to be a “strong currency backed by country’s oil reservoirs.” The government will act as the producing and controlling hand of the same. The aspiration behind Petro is to compliment the Venezuelan Bolivar Fuerte (VEF) currency and to overcome US sanctions.
The idea of statewide cryptocurrency is thus gaining more popularity and supporters from around the world.
Do you think Norway’s central bank would succeed in shaping CBDC? Let us know your views in the comments section.