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Norway’s Central Bank, Norges Bank, has extended a study that focuses on issuing a central bank digital currency (CBDC) as a way to supplement cash for customers. Several central banks in Europe, including Sweden’s Sveriges Riksbank, are already actively exploring the benefits of issuing a CBDC.
“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.”
The report states that a CBDC could provide customers with an alternative means to store assets. According to Norges bank, the foundation of a CBDC must also not interfere with the ability of the bank and other financial institutions to provide credit. Norges Bank will reportedly continue to issue cash as long as there is demand for it. The working group has only completed the initial phase of studying a potential CBDC, stating:
“It is too early to conclude whether Norges Bank should take the initiative in introducing a CBDC. The impacts of a CBDC – and the socio-economic cost-benefit analysis – will depend on the specific design. The design, in turn, will depend on the purpose of introducing a CBDC.”
Other countries in Europe have also begun to consider issuing a digital currency through their central bank. Similar to Norway, Sweden’s Riksbank is considering an e-krona as a result of declining cash circulation.
The central bank is studying two CBDC models. The first is the account-based model, in which accounts and transactions are under the authority of the bank, which is responsible for account-to-account transactions. The second is the value-based model, in which money is stored on debit cards or smartphone applications and then transferred from account to account without the bank’s interference or knowledge.
The primary goal of this study is to determine whether a CBDC would be a stable and trusted form of currency. According to the working paper, for a CBDC to be a realistic supplement to cash it must act as a means of payment for goods and services, store value, and be able to be used as a means of accounting to compare the price of goods and services. In addition to these stipulations, the bank added that the “CBDC must be denominated in the Norwegian krone and have the same value as other means of payment denominated in the Norwegian krone.”