Norway's Decision on CBDCs: No Immediate Need

Norway's central bank, Norges Bank, has determined that there is currently no need for a central bank digital currency (CBDC). After years of research, the bank concluded that the existing payment systems are sufficient for consumers, businesses, and financial institutions.

Key Takeaways

Norges Bank does not see an immediate need for a CBDC and will not introduce a digital krone at this time.
The efficiency and security of Norway's current payment system were highlighted as sufficient.
The bank is open to the possibility of a CBDC in the future if necessary, distinguishing between retail and wholesale CBDCs.
Norges Bank will continue to explore tokenization and monitor global developments in digital currency.

Norway

No Immediate Need for CBDC

Norway's central bank, Norges Bank, has announced that it does not currently require a central bank digital currency (CBDC). This conclusion follows several years of research and discussions about the effectiveness of the country's existing payment systems for consumers, banks, and merchants.

In a statement released on Wednesday, the bank indicated that the introduction of a digital krone is “currently not warranted.” This decision came after an evaluation of whether a CBDC was necessary to ensure that payments in Norway are secure, efficient, and appealing.

The use of cash in Norway has diminished significantly and is now among the lowest in the world, which has intensified discussions regarding a digital payment alternative. The bank stated, “The Norwegian payment system is efficient and secure,” highlighting its stable operations, quick settlement times, low costs, and robust contingency plans. Moreover, efforts are already ongoing to enhance these backup systems further.

Flexibility for Future CBDC Introduction

Governor Ida Wolden Bache emphasized that the decision was about timing rather than a permanent dismissal of the idea. She commented, “Norges Bank has concluded that introducing a central bank digital currency is currently not warranted. However, the need for such a currency may change in the future. We will be ready to introduce a central bank digital currency if it becomes necessary to maintain an efficient and secure payment system.”

The central bank outlined two primary types of CBDCs: retail and wholesale. A retail CBDC would function as a widely available payment method, akin to cash and bank deposits, while a wholesale CBDC would be confined to banks and financial institutions. In the wholesale system, deposits at the central bank would be represented as digital units, or tokens, within a blockchain-based ledger and used for interbank transactions.

Ongoing Research in Tokenization Without Immediate CBDC

Norges Bank remains committed to exploring tokenization and acknowledges its potential to foster innovation, enhance efficiency, and reduce settlement risk. Nonetheless, the bank also cautioned that certain risks and unanswered questions still exist, and the overall adoption of such systems is uncertain.

The bank intends to continue running tests with tokenized solutions alongside participants in the payment systems. Additionally, a report detailing its CBDC research will be published early next year, which will outline further plans for studying this topic. Norges Bank will keep an eye on international trends, including the Eurosystem’s exploration of a possible digital euro and evolving standards that could support a shared CBDC infrastructure in the future.