Norwegian Central Bank is Testing Technical Digital Currency Solutions
Norges Bank announced that its central bank digital currencies (CBDC) working group have agreed to begin looking into technological CBDC solutions.
Norway is a member of the European Union, but it is not a member of the eurozone, and it has its currency, the Norwegian krone, like Sweden.
Norway has been experimenting with CBDCs for four years and claims to have the lowest cash consumption in the world.
This, combined with rapidly changing payment systems, is the impetus for a new research process.
“Central bank cash offers a range of valuable attributes to the payment system that may be important to keep and improve further by issuing a CBDC. Governor Oystein Olsen said, “We need more information to determine whether or not issuing a CBDC is acceptable.”
The bank also issued a CBDC paper on its third-phase explorations, requesting input by June 25, 2021.
This latest fourth technological experimentation process is expected to last up to two years and help determine which approach to further test.
In the meantime, policy changes might be necessary.
Norway estimates the penetration of a CBDC at only 3% of GDP for its study.
Two possible technological directions were outlined in the study.
One was tokenized money dependent on a ledger. Although blockchain and distributed ledger technology (DLT) were not explicitly mentioned, they were found to share specific characteristics with cryptocurrencies.
An account-based solution, similar to e-money, is an alternative option.
Regardless of which path is chosen, the bank stressed the importance of being “DLT compliant,” and programmable money has sparked a lot of interest.
Accessible, decentralized networks like public blockchains, according to the paper, are currently too immature to sustain a CBDC. As a result, if DLT is chosen, the blockchain would be allowed.
However, it is possible to envision a future in which CBDCs can be combined with a decentralized blockchain, which may serve as a “overlay” ledger for services that use CBDCs.
Meanwhile, the Bank of England and the UK Treasury have formed a CBDC task force. The results of the eurozone’s public digital euro survey were published.
China has also progressed to a more advanced stage of digital yuan research, which includes experimenting with different types of wallets and cross-border trials.