The central bank of Norway, Norges Bank, might launch its own cryptocurrency. Norges Bank Papers, an official document recently published by the reserve bank, states that the institution might start developing its own cryptocurrency as it could be used as a medium of exchange.
The write up also mentions that a state-backed digital currency could help “ensure confidence in money and the monetary system.” According to the report,
“Technological advances have brought this issue to the fore. A decline in cash usage has prompted us to think about whether at some future date a number of new attributes that are important for ensuring an efficient and robust payment system [should be taken into consideration].”
The document states that should it become necessary, based on requirements it is currently examining, it could start issuing a central bank digital currency (CBDC). Currently, the central bank has been able to identify three possible use cases for a CBDC: a “supplement to cash,” another way to make bank deposits, and an additional form of electronic payment.
The report, which has been authored by a Norges Bank working group, mentions that the institution will issue a CBDC if demand for cash decreases. Notably, it adds that the “primary purpose” of developing and issuing its own cryptocurrency would be to maintain the confidence people have in the nation’s monetary system. Moreover, the report says that Norges Bank would not be issuing a CBDC for the purpose of directly handling credit provision, which is normally done by a country’s private banks.
Developing a CBDC Isn’t Simple
The process of creating a state-backed cryptocurrency is quite “complex”, according to Norges Bank. This, per the report, as there is “no international experience” that could help the bank. At this point, the report states that Norges Bank will continue to analyze different aspects related to creating a CBDC.
Although countries like Venezuela have launched cryptocurrencies, the actual implementation process required to issue a legitimate national digital currency, which can gain the confidence of a country’s citizens, has not yet been developed. As covered, Switzerland’s government is looking to understand the risks and benefits of a state-backed cryptocurrency.