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Norges Bank, the Central Bank of Norway, has published a document, which indicates its readiness to create a cryptocurrency that will ensure confidence in the monetary system and the domestic currency. It is the first time Norges bank has published a report revealing its plan to develop a central bank digital currency (CBDC).
The Central bank’s report also explains that a decline in cash usage and technological developments were some of the reasons for the bank to consider issuing a virtual currency. Norges bank wants to ensure a robust and efficient payment system. This will uphold confidence in the monetary system.
Norges Bank working group, in its report about the issue of CBDC, has stated
“Technological advances have brought this issue to the fore. 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.”
The bank is of the opinion that several issues may arise due to the issue of CBDC, due to a lack of experience. The report further states that this is one of the reasons for the working group to conduct a detailed study of digital assets. The working group is also trying to understand how the CBDC can be used to achieve the purpose and benefits.
Norges bank also has clarified that it does not intend to take control of credit provision from banks. The document states “The existence and scope of a CBDC must not impair the ability of banks and other financial institutions to provide credit.”
Apart from Venezuela, which has launched its own cryptocurrency Petro, and Iran, which may soon launch its own digital asset, Western European countries such as the UK is also studying the possibility of launching a government backed cryptocurrency in the future.
Mark Carney, Governor of the Bank of England, had stated
“The underlying technology is actually of a fair bit of interest. We are working with it at the Bank of England. I have participated in discussions with the major central banks on this issue.”
Russia is also studying the possible launch of a government backed cryptocurrency to evade sanctions. Riksbank, the central bank of Sweden, which is a cash free country, is working to launch e-Krona in the next few years.
Recently, a report published by Morgan Stanley has mentioned that central banks could use cryptocurrencies to implement deeper negative interest rates, which can avert a major financial crisis. So, we can expect the central bank of many more countries to start considering the possibility of issuing a government backed cryptocurrency.
