Norges Bank Reassesses Need for Digital Krone
Norway’s central bank has taken a significant step back from advancing a national central bank digital currency (CBDC), announcing that it will not recommend moving forward with a digital krone at this time. This decision demonstrates that the country is reassessing the urgency of implementing retail and wholesale CBDCs.
The announcement was made public after the central bank released a statement on Wednesday, December 10, noting that the current payment system in Norway already offers safeguarded, effective, and cheaper transactions, easing the need for a CBDC.
However, this did not imply that Norway’s central bank is not open to the concept of introducing a CBDC in the future.
Years of Testing Yield No Immediate Need for CBDC
In a statement, Ida Wolden Bache, the Governor of Norges Bank, confirmed that Norway’s central bank discovered that the country does not require a central bank digital currency at this moment. However, she still insisted that the urgency for launching a CBDC might change in the future.
According to Bache, if the central bank ever believes the country needs an effective and secure payment system, it will prepare for the introduction of a CBDC. This decision was embraced after the central bank assigned skilled experts to test various models for both retail and wholesale CBDCs for several years. The practice included trials utilizing token-based settlements on blockchain technology.
Notably, Norway’s central bank interest in CBDC grew in 2023 when it participated in Project Icebreaker, a multi-central bank research initiative centered on the technological feasibility of interlinking different domestic central bank digital currency systems for international payments.
Later in 2024, Norges Bank considered several factors. After careful thought, Kjetil Watne, who heads Norges Bank’s CBDC project, told reporters that if the central bank decided to issue CBDCs, these would be made available alongside cash and other digital currencies.
Nonetheless, Norges Bank dropped these considerations this year, arguing that the advantages surrounding CBDCs have yet to be proven, despite discovering that wholesale central bank digital currencies could ultimately enhance the process of banks settling transactions with each other.
Moreover, it was confirmed that there is a lack of standards or developed infrastructure established to support quick implementation. The central bank acknowledged that “Many central banks are looking into CBDCs, and the Eurosystem is thinking about introducing a digital euro. However, suitable IT systems or standards for these systems are not available yet.”
Potential for Future CBDC Introduction Remains
Earlier, Norway’s central bank pointed out that if other central banks decide to introduce CBDCs, this move might result in the collaboration of banks to work on infrastructure. Hence, this illustrates that the central bank has not completely abandoned the idea of CBDCs.
Norges Bank also highlighted that it may consider using CBDC solutions and standards from the Eurosystem. To demonstrate the banks’ commitment to embrace this upgrade, recent reports noted that the European Central Bank (ECB) has already progressed to the next phase of developing the digital euro.
Following the ECB’s move, analysts speculated that the issuance of the CBDC may commence in 2029. This, however, will depend on whether a suitable legal framework can be established.
The prediction followed the ECB’s suggestion on October 30 that, if regulations are completed by 2026, pilot projects for CBDCs could commence in 2027. This will pave the way for the Eurosystem to be prepared for the likelihood of first issuance in 2029.