Next year, Norges Bank, Norway’s Central Bank, is going to make a major decision regarding the potential of establishing its own CBDC, or central bank digital currency.
According to Deputy Governor Pal Longva, the central bank was moving toward finalizing the recommendation, though it did not feel like the work had to be fast-tracked immediately.
Indeed, other European countries, like Switzerland, have been moving ahead on digital currency projects. Norway, on the other hand, will always take its time and move cautiously.
“We are in line with many central banks — we are studying complex issues and have much to consider before proceeding,” Longva said during an interview in Oslo.
He expressed how Norway hasn’t fallen behind in the game while Switzerland, for instance, is also on pace, pushing ahead in similar plans. Norway is weighing the complexities involved before committing to any form of a CBDC program.
Evaluating Retail Vs. Wholesale CBDC Options
Norges Bank is currently developing two possible models for CBDC, including retail CBDC, which will be used by consumers, and wholesale CBDC for transactions between banks.
Currently, Norges Bank focuses more on the wholesale CBDC approach, which is presently gaining a strong foothold in various studies by central banks around the world.
Longva said that a wholesale version of CBDC may be easier to deploy than a retail version because, for now at least, it poses problems that appear a bit more complicated and require further dialog with private banks as well as other stakeholders.
Other central banks are also trending to the wholesale model, according to the Bank for International Settlements survey. The latest insights suggest that it is more probable that a wholesale CBDC will be released into circulation within a six-year period than a retail CBDC.
A Stable Cashless Society
Norway is one of the most cashless societies in the world because 98% of its population uses debit cards and over 95% relies on mobile payment platforms, according to the Trading Platforms’ survey conducted in 2023.
Even though the use of cash has declined sharply, recent figures show that it has flattened out at low levels. Only 2% of respondents reported using cash at their last purchase in a physical store, according to a Norges Bank survey.
With that light migration into digital payments, Norges Bank is considering all the implications of a CBDC, especially in its privacy concerns, and impacts on the banking sector. It is the prerogative of the government to decide whether or not Norway will use a digital currency.
All that the central bank is trying to do is to give its recommendation by 2025 after finishing the studies and consultations.
Featured image from Innovation Norway, chart from TradingView
