Norway’s central bank has announced it will start testing technical solutions for a central bank digital currency (CBDC), over the next two years.
In the announcement, Norges Bank noted that many other central banks around the world have been carrying out similar experiments. This has kept their own motivation for research into CBDCs strong. After conducting research on CBDCs for the past four year, Norges Bank feels it is ready for the next step. In particular, this involves “technical testing” with more in-depth analysis looking into the implications of launching a CBDC.
The central bank said that cash payments in Norway are now probably the lowest in the world. This is largely due to the rapid evolution of payment technologies.
“Central bank cash provides the payment system with a number of important attributes that may be relevant to retain and develop further by issuing a CBDC,” said Norges Bank governor Øystein Olsen. He also added that additional knowledge would be necessary for the central bank to determine whether issuing a CBDC is appropriate.
Although the proposed testing will take place over the next two years, Norges Bank did not indicate when a CBDC would be launched in Norway. “Any introduction of a CBDC will still lie some time in the future,” the central bank stated.
Norway in no rush for a CBDC
The lack of a definitive timeline was also echoed by the deputy governor of Norges Bank Ida Wolden Bache. Speaking at Finance Norway’s Payments Conference on Nov. 5, last year, she described the decline of cash use in her country as influencing the decision surrounding CBDCs.
Highlighting a recent survey, Wolden Bache indicated that only 4% of payments were made using cash. She added that this was significantly lower than before the COVID-19 pandemic struck. To her knowledge, it was the lowest level of any country in the world.
Despite acknowledging the four years of CBDC research, she said “the lack of urgency reflects our view so far that there is no acute need to introduce a CBDC.”
Other CBDC developments
Several other countries are carrying on their own CBDC developments. Earlier this week, the U.K. announced the launch of a new task force to explore the potential for a CBDC.
Meanwhile, Japan began experimenting with its own CBDC, last month. The Bank of Japan said it is participating in group studies to determine the best way to issue a CBDC. Group members include the Bank for International Settlements and six central banks, such as the U.S. Federal Reserve and the European Central Bank.
Similarly to Norway’s central bank, the Fed is in no rush to issue a digital dollar.