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Norway’s Central Bank Chooses Ethereum L2 Project for CBDC Test

2 mins
Updated by Ryan James
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In Brief

  • Norway has commission Nahmii to create a sandbox for testing its CBDC.
  • Most Norwegian banks are expected to be involved in the sandbox.
  • Plans to trial a digital currency began last year.
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Norway’s Central Bank is piloting it’s Central Bank Digital Currency (CBDC) using a sandbox created by Nahmii, an Ethereum L2 solution.

Nahmii announced on May 16 that Norges Bank (Norway’s Central Bank) had awarded it a tender to create an experimental Ethereum L2 sandbox for an upcoming CBDC. The bitcoin and Ethereum networks inherently suffer from low transaction throughput. A layer two solution aims to solve this by drawing on the security of the Ethereum mainnet while introducing new solutions to make transactions faster and easier to regulate.

Nahmii, which has been developing the solution for four years, said it commits to building, maintaining, and training “Norges bank users and partners on the sandbox.”  The sandbox will likely include all big banks in Norway. “The introduction of a CBDC is an important and complex issue,” said Norges Bank governor at a conference in November 2021. Bach said that “Norges Bank’s goal is to have a secure, effective, and attractive NOK payment system – today and in the future.

“Layer-2” solutions also offer lower fees than the high gas charges on the Ethereum Mainnet. The concept of using a public blockchain was shunned initially by Norges Banks because of “the lack of control for Norges Banks, risks associated with immature technology, and challenges related to scalability and speed.

World’s most cashless country pledged to test CBDC last year

In April last year, Norge’s Central Bank announced that the world’s most cashless country would begin testing a central bank digital currency options within the next two years. “Norges Bank’s research into CBDCs has run for a good four years. A new element moving ahead will be technical testing combined with further analysis of the need for and the implications of introducing a CBDC,” said the bank.

Some of Norway’s European neighbors have gone down the CBDC route, with Sweden completing the second stage of its CBDC trials in February, France in January, and the Netherlands setting the scene as early as 2020.

Oysten Olsen, the governor of Norges Bank, told Bloomberg in March 2021 that they consider bitcoin as “far too resource-intensive, far too costly, and most importantly, it doesn’t preserve stability.”

Countries using private Ethereum

Consensys, the company behind the popular non-custodial wallet MetaMask, last year embarked on four CBDC projects with the Hong Kong Monetary Authority, Bank of Thailand, Australian Reserve Bank, and Société Générale to use a private, permissioned version of the Ethereum blockchain called ConsenSys Quorum.

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David Thomas
David Thomas graduated from the University of Kwa-Zulu Natal in Durban, South Africa, with an Honors degree in electronic engineering. He worked as an engineer for eight years, developing software for industrial processes at South African automation specialist Autotronix (Pty) Ltd., mining control systems for AngloGold Ashanti, and consumer products at Inhep Digital Security, a domestic security company wholly owned by Swedish conglomerate Assa Abloy. He has experience writing software in C,...
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