More and more national banks are announcing their intent to begin research on central bank digital currencies (CBDCs) in a month where cryptocurrencies have risen and fallen.
The latest addition in a worldwide campaign to take back the financial wheel is the Norwegian central bank.
Norges Bank To Commence CBDC Technical Testing
In an official release, the Norges Bank said that it would begin technical testing of CBDCs over the next two years.
The national regulator said it is moving ahead with its CBDC program following the recommendation of an internal working group.
According to the Scandinavian bank, the working group feels that the time for a CBDC is right given the upsurge of national banks embarking on independent projects.
It noted that several apex banks are currently working on making digital copies of their national currencies while others are in the testing stage. These digital endeavors have fostered the growth of the payment industry and the subsequent reduction in the use of cash.
Speaking at the event, Øystein Olsen said that central bank cash provides many important features that are crucial to the retention and development of CBDCs. He, however, noted that additional data is needed to determine if issuing a CBDC would benefit the economy.
The Norwegian apex bank noted that it has been exploring CBDCs in the last four years and feels that this might be the appropriate time to take it a notch higher. It, however, noted that whatever conclusion they reach on issuing digital cash would be in the foreseeable future.
This is not the first time Norges Bank has considered creating a digital krone. In a May 2018 working paper, the internal working group touched on making a supplement to cash to restore confidence to money and the monetary system.
According to the report, the group comprising financial experts looked into different aspects that the issuance of a digital fiat replica would touch on. The paper highlighted three key applications of a CBDC. The first bordered on the introduction of a reliable alternative to deposits in banks. The second would see CBDCs used as a legal tender to supplement cash, while the third would see CBDCs used as a backup solution for electronic payment systems.
CBDC Race Heats Up
The CBDC race is heating up as more central banks are announcing independent projects to explore the field.
Recently, the Bank of England and HM Treasury announced that they would be creating a CBDC Task Force to explore the possibility of a digital pound.
The Bank of Japan also made a similar announcement in the past week, and even the European Central Bank (ECB) has said it is looking at a digital euro becoming available in the next four years.
Meanwhile, China seems to be far ahead of the pack, although its digital yuan is not operational.
In a press release shared with CNBC, the Asian nation said it plans to issue a limited copy of its digital fiat in the coming Winter Olympics to foreigners and visitors. However, it has debunked rumors that its digital currency electronic payment (DCEP) is looking to topple the US dollars as the world’s reserve currency.