Norway’s Norges Bank Considers Developing Central Bank-Issued Cryptocurrency

News | May 24, 2018 By:

Norges Bank, the central bank of Norway, has published a paper that explores the possibility of developing its own digital currency.

The report, prepared by the central bank’s working group, stated that a decline in cash usage has prompted the bank 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.

The bank is exploring various features and purposes for a central bank digital currency (CBDC) and emphasizes at least three possible applications. These inlcude the introduction of a reliable alternative to deposits in private banks, an independent back-up solution for electronic payment systems, and a suitable legal tender as a supplement to cash.

“Introducing a CBDC in Norway – as a supplement to cash – would entail offering a digital liability on Norges Bank for use as a means of payment and store of value,” the report said. “A CBDC would also entail the creation of dedicated payment solutions that Norges Bank would have full or partial responsibility for, but would not necessarily operate and maintain. A CBDC does not mean that Norges Bank will provide credit to the general public. That role will still be played by banks and other financial institutions. The primary target group for any CBDC will be the general public in Norway: private individuals, associations, organizations, non-financial enterprises and government authorities. ”

The working group has only completed the initial phase of studying a potential CBDC. The group said that it is too early to conclude whether Norges Bank should take the initiative in introducing its own digital currency.

“The impacts of a CBDC – and the socio-economic cost-benefit analysis – will depend on the specific design,” the report said. “The design, in turn, will depend on the purpose of introducing a CBDC. On the other hand, the working group has not identified issues allowing it to conclude at present that introducing a CBDC can be ruled out. The working group has identified a number of factors that suggest caution, particularly in order to avoid conversion of bank deposits into a CBDC that is so rapid and so extensive as to impair lending.”

Other major central banks have also begun to consider issuing its own digital currency, including the Bank of Canada, the Bank of England and Sweden’s Riksbank, among others.