With governments around the world deciding how to approach cryptocurrencies, the world is observing patiently what some of the developed countries decide to do. Norway has often been regarded as an economic success story and is revered globally as a country with optimal policies and modern technologies. Norway’s approach with cryptocurrencies seems to differ from many other countries as well. Instead of setting blockchain technology aside as a scam, the country is going to embrace these new possibilities. Norges Bank, the central bank of Norway, recently announced its intention to develop a national virtual currency (click here to read the original Norwegian article).
Norway is one of the most cashless countries, with reportedly only 6% of the population using cash as a payment option. It is only natural that in such an environment an idea of a virtual currency would arise. Cryptocurrencies have all the best qualities of a currency. They are easy to transfer, they are almost infinitely divisible and are cheap to create if desired. One problem with cryptocurrencies that many people might have is the riskiness. With a national cryptocurrency, that problem is eradicated as well leaving a perfect opportunity to introduce a new medium of exchange in a country.
Norges Bank issued a 55-page document outlining the benefits of a national virtual currency. “This report, prepared by a Norges bank working group, provides an overview of aspects that should be given weight in assessing whether Norges Bank should issue a CBDC [central bank digital currency]. A CBDC can be designed in various ways, depending on the desired aims,” – mentions the paper.
The document also explains motivations behind the project saying – “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 and confidence in the monetary system will be needed. If the answer is yes, a CBDC may be an appropriate measure for remedying weaknesses that may otherwise arise. It is not Norges Bank’s ambition to take over credit provision from banks. A premise underlying this work is that the existence and scope of a CBDC must not impair the ability of banks and other financial institutions to provide credit.”
The central bank also said that it would continue issuing cash until there is a demand for it. Nevertheless, with Norway’s preference of cashless payments, it could be the case that the demand could be reduced to an extent where it would be possible for the country to soon move to a completely cashless system.