With countries lining up to research their need for Central Bank Digital Currencies (CBDCs) and proofs-of-concept for digitizing their currencies, it’s becoming a question of who will join the train next. For Norway, however, uncertainty exists on CBDCS and how viable they are.
Beneficial, but Not Compulsory
Last Thursday, Ida Wolden Bache, the Deputy Governor at Norway’s central bank, touched on the subject of CBCs and confirmed that the bank was aware of their increasing prominence. In a speech at Finance Norway’s payments conference, Bache highlighted that the use of cash in the country had declined, giving some credibility to the need for a CBDC.
Norway uses the kroner, and like most countries in the world, the Scandanavian nation witnessed a decline in cash usage due to the coronavirus pandemic. Shedding more light on the trend, Bache explained:
“Only 4% of payments are now made using cash. This share is approximately the same as in spring, and considerably lower than before the pandemic. To our knowledge, the share of cash payments is lower in Norway than in any other country.”
However, she also confirmed that traditional fiat has several benefits over a possible CBDC. For one, Bache pointed out that cash’s greater ubiquity makes it a better legal tender than any digital asset. The policymaker further pondered:
“The question is whether something important will be lost if cash dies out and we do not introduce CBDC? Is central bank money crucial to confidence in the monetary system? Could CBDC provide more than cash can offer, in the form of a greater range of uses and more innovation?”
Summarizing, Bache explained that the Norwegian central bank’s lack of pace in delivering a CBDC reflected their belief that there is no “acute” need for one at the moment. The policymaker added that while CBDCs have become more common, Norway shouldn’t merely jump on the bandwagon. The country will need to make a well-informed decision concerning this issue, and that will take some time.
The Philippines Takes a Step Back
Norway is the second developed country to announce its conservative approach to a CBDC in the past few weeks. Last month, Philippine central bank governor Benjamin Diokno said at a press briefing that the bank was stepping back to learn from private-sector digital currencies as it works to launch its asset.
While the country has confirmed a desire to launch a CBDC, Diokno explained that studies had shown a need to do more research on these assets. Most notably, he explained that they needed to understand how best to create networks between the country’s central bank and constituent commercial banks.
So far, the central bank’s tests have covered several issues surrounding CBDC development. These include legal frameworks, monetary policy, settlements and payments, regulatory oversight, and financial inclusion. However, as Diokno explained, the bank could benefit from studying several private-sector digital currencies’ business models.
As such, the country won’t be launching its CBDC anytime soon. Of course, this isn’t to mean that the hope is dead.