A working paper published on May 18, stated that Norges Bank, the central bank of Norway, is thinking of developing a native digital currency to “ensure confidence in money and the monetary system.”
The report explores the critical aspects of issuing a digital currency backed by the central bank (CBDC). Three possible CDBC applications under scanner: a suitable legal tender as a supplement to cash, the introduction of a reliable alternative to deposits in private banks and an independent backup solution for electronic payment systems.
Governor of Norges Bank, Øystein Olsen, stated: “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 claims that a CBDC system will allow customers to store assets in an alternative manner. It further stated that framework of CBDC should not affect the credit providing ability of banks and other financial institutions. As of now, the group is on the brink of the study of a potential CBDC while Norges Bank will not cease the issuance of cash until its demand exists.
The report stated, “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.”
Norway is not the only country to foresee the use of digital currencies for its benefits as other countries in Europe are on the same road. Riksbank from Sweden will probably launch e-krona to support its diminishing cash circulation in the country.
The use of bank notes has considerably declined in Sweden. Therefore, Riksbank has been conducting research to explore the aspects associated with e-krona being launched as a virtual coin. On the other hand, some experts have criticized the bank’s decision amidst numerous claims on the internet.
Similarly, the Swiss Federal Council has also undertaken a study over the introduction of a native digital currency with the risks and opportunities involved in the project. Currently, all eyes are on the lower house of the Swiss parliament as its support will lead up to the commencement of the study by the Swiss Finance Ministry.
The initiative was taken by Romeo Lacher, chairman of the Swiss stock exchange SIX when he backed the possibility of a state-owned digital currency. He said, “An e-franc under the control of the central bank would create a lot of synergies – so it would be good for the economy.”
The use of digital currencies is inevitable as the world is getting positive over bitcoin’s value again. Banks around the world are gearing up to gain benefits from another high in the value of digital currencies. Even if banknotes remain in circulation most of the economy will work on virtual coins and eventually world economy will become a playground for virtual tokens.
