Norway’s central bank is flirting with the development of a central bank digital currency (CBDC). The digital currency would be a direct alternative to cash. A report by Norges Bank states that the bank will continue to issue cash as long as “there is demand for it” but will also allow CBDC to “be an alternative to deposit money.”
Technological advances and reduced cash usage are the main reasons why they’re creating a digital currency:
“An important trend in the payment system is a gradual decline in cash usage. Cash will be with us for many years to come. However, it is possible that, at some point, cash usage will be so low that it can no longer be considered a generally available means of payment. It is not Norges Bank’s aim to eliminate cash, either with the aid of a CBDC or in some other manner. The use of cash should be determined by demand.”
“The technology is generally immature. – The systems, or at least those we have examined to date, offer far lower processing capacity and speed than modern centralised payment systems. New versions of the technology may offer improvements, but there is some way to go. – Open networks based on consensus through “proof of work” consume a disproportionate amount of energy, resulting in very high system costs. It is likely that this task could be performed more efficiently by a system incorporating a central administrator/owner. (In the case of a CBDC, this would be the central bank or an operator appointed by the central bank.)”
The CBDC still has to go through a final decision based on a cost-benefit analysis to take all factors into consideration and how ti would impact financial stability, policy, and the payment system.
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