Norway’s central bank, Norges Bank, has announced that it might unveil a digital currency of its own. According to an official document from the bank, it is considering developing a digital currency which could serve medium-of-exchange purposes.
Norges Bank states that the national virtual currency will mainly serve the purpose of acting as a cash supplement. It will find use in making bank deposits as well as acting as an electronic payment method. Norges Bank intends to issue the digital currency in the event that cash demand falls. The Norway central bank clarified the digital currency would not turn it into a lender as this will be left to the country’s private banks.
Central Bank Digital Currency (CBDC)
“A CBDC does not mean that Norges Bank will provide credit to the general public. That role will still be played by banks and other financial institutions,” says the Norges Bank report.
Norway’s reserve bank has also acknowledged that developing a national digital currency is a complex undertaking especially since there isn’t a successful example to learn from. The Nordic country is not alone in considering the creation of a national digital currency. The Swiss government has commissioned a study aiming at investigating the risks and benefits a state-backed virtual coin. The “e-franc” could be the name.
Historically, the central bank of Switzerland has exercised caution regarding its interactions with digital currencies. Last month, a governing board member of the Swiss central bank, Andrea Maechler, said private digital currencies could better suit the needs of users. Maechler observed that digital currencies issued by central banks were not necessary in ensuring efficient, cashless, retail payments. Furthermore, she said having national virtual currencies could offer few advantages and may result in incalculable risks in financial stability. It would also result in the central bank acting like a commercial bank, and in a period of crisis, it could aggravate the problems associated with bank runs.
Earlier this year, Venezuela launched a national virtual currency known as the Petro (PTR). As the name suggests, oil backs the crypto. Its launch was to assist the national economy. Reportedly, the cryptocurrency raised $735 million in its first day of pre-sale , though there were no independent sources to confirm.