Speaking at a conference on November 5, Ida Wolden Bache, the deputy governor of Norway’s central bank, detailed the decline of cash in her country while also discussing the potential of Central Bank Digital Currencies (CBDCs).
According to Wolden Bache’s speech, changes in payment patterns have accelerated during the Covid-19 pandemic. Norway has experienced a notable decline in people using kroner, the national fiat currency, for payments.
“Norges Bank conducted a new payments survey three weeks ago. Only 4% of payments are now made using cash.”
Wolden Bache went on to note that this is significantly lower than before the Covid-19 pandemic struck and that, to her knowledge, it’s the “lowest” level of any country in the world.
Given this fact, it’s tempting to assume that Norway is primed to adopt a national digital currency. But, according to the deputy governor, this isn’t the case, at least in the short term:
“Cash is a credit risk-free alternative to bank deposits and can promote competition in the payment market.”
Norges Bank’s research into CDBC has been underway for almost four years, but the prospective introduction of a CBDC is still some way off. Per the speech,
“the lack of urgency reflects our view so far that there is no acute need to introduce a CBDC.”
Despite making this statement, Wolden Bache did mention the need to exercise the “precautionary principle,” i.e., be prepared with a CBDC should the payments system move in a different direction than currently predicted.
She also said that challenges from “different forms of money” like Facebook’s Libra cryptocurrency project or others like it should be taken seriously.
A Trending Topic
CBDCs have been a hot topic in 2020, with many of the world’s bigger countries vying for an advantage in this new arms race. It should be noted that introducing one alongside a fiat currency is no small undertaking.
As Wolden Bache alluded to in her speech, doing so is not merely a matter of developing the right technology. Introducing a CBDC calls into question the central bank’s role in monetary policy; it requires political buy-in and, potentially, the need to rewrite banking laws.
So far, China appears to be the furthest along in the process of researching and launching a retail CBDC. As for Norway, the Scandinavian country seems to be taking a stance similar to that of Australia and the United States, preparing itself but showing no intention to rush into a CBDC launch.