In the coming year, Norges Bank, the Central Bank of Norway, is poised to make a significant decision regarding the introduction of its own Central Bank Digital Currency (CBDC). Deputy Governor Pal Longva has indicated that while the bank is moving towards finalizing its recommendation, there is no immediate rush to expedite the process. This cautious approach is characteristic of Norway’s financial strategies.
Norway’s Cautious Approach Compared to Other European Nations
While various European countries, such as Switzerland, are advancing swiftly in their digital currency initiatives, Norway remains steadfast in its deliberate pace. The nation’s careful consideration is evident in its thorough examination of the complexities associated with a CBDC. As Deputy Governor Longva articulated in an interview held in Oslo, “We are in line with many central banks — we are studying complex issues and have much to consider before proceeding.”
Considering Retail and Wholesale CBDC Models
Norges Bank is currently exploring two potential models for its CBDC: the retail CBDC, intended for consumer use, and the wholesale CBDC, which would facilitate transactions among banks. At present, the bank is prioritizing the wholesale CBDC model. This approach is gaining traction worldwide, as evidenced by studies from various central banks.
According to Longva, the wholesale CBDC might be easier to implement compared to the retail version due to fewer complexities and the need for extensive dialogues with private banks and other stakeholders. A survey conducted by the Bank for International Settlements supports this trend, indicating a higher likelihood of the wholesale CBDC entering circulation within the next six years compared to its retail counterpart.
Norway’s Transition to a Cashless Society
Renowned for being one of the most cashless societies globally, Norway has seen a significant shift towards digital payments. A remarkable 98% of the population utilizes debit cards, while over 95% rely on mobile payment platforms, as highlighted in a survey by Trading Platforms in 2023.
Despite this trend, the usage of cash has stabilized at minimal levels, with only 2% of respondents in a Norges Bank survey reporting cash usage for their last in-store purchase. Given this widespread transition to digital payments, Norges Bank is meticulously evaluating the potential implications of a CBDC, particularly concerning privacy issues and the impact on the banking sector.
The ultimate decision regarding the adoption of a digital currency rests with the government, but Norges Bank aims to provide a well-informed recommendation by 2025, following comprehensive studies and consultations.
