The deputy governor of the Norway’s central bank said there’s no urgent need for the nation to launch a digital krone in a speech at the country’s Finance Payments Conference on Thursday.
Outlining the Norges Bank’s current assessment of a central bank digital currency (CBDC) for real-time payments, Ida Wolden Bache said Norway is already seeing falling levels of cash use and increasing adoption of payment apps tapping bank deposits that may be factors in deciding on such a launch.
But cash serves several useful functions to society that user are not necessarily aware of when choosing payments methods, Wolden Bache continued. These include as a back-up should electronic payments not be available, as “widely accessible” legal tender and as a “credit risk-free alternative to bank deposits.”
As such, the question is not should the Norges Bank introduce a digital currency to work alongside cash, but rather would anything important be lost if it didn’t and cash “died out.”
“Could CBDC provide more than cash can offer, in the form of a greater range of uses and more innovation?” Wolden Bache asked.
There are other factors too, with the deputy governor citing the need to be prepared with a CBDC should the payments system move in a different direction than can be predicted currently – what she called the “precautionary principle.”
The deputy governor said challenges from “different forms of money” like the Libra cryptocurrency project initiated by Facebook should be taken into account. So too must “structural changes” in banks’ payment infrastructure.
“We must think through the effect these changes may have on competition, contingency solutions and national governance and control of the payment system,” she said.
Norges Bank has been investigating CBDCs since 2017, yet a potential introduction is still “some way off” according to Wolden Bache. “The lack of urgency reflects our view so far that there is no acute need to introduce a CBDC.”
That’s largely because CBDCs raise “fundamental questions as to the role of central bank money,” according to the official. “This is much more than a question of technology.”
A CBDC introduction would bring a “substantial change” in the monetary system and would require a decision from government as well as possible changes to banking law, she said.
The central bank’s CBDC research is now its third phase, expected to be completed early next year. Wolden Bache detailed that Norges Bank is working on defining the features a CBDC should have and looking at technical solutions.
“We are also drawing on other central banks’ experience and plans,” Wolden Bache said. “Possible strategies for testing and experimenting with technological solutions are also being assessed.”
Most central banks now appear to be at least looking into CBDCs, with a few starting to state publicly that a launch is likely in coming years, while China is already closing in on a launch in the near future.