Several central banks around the globe are looking into building their own digital currency to become more efficient and bring trust in the banking system. The growing popularity of cryptocurrency and digital trading has fueled the digital transactions and more and more people are joing each day.
Norges Bank, the Central Bank of Norway also want to be a part of this revolution.
A number of central banks are considering whether they might in the future issue a central bank digital currency (CBDC) for general purpose users. A CBDC of this kind is a central bank liability denominated in the official unit of account and will be a supplement to cash.
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.
This report, prepared by a Norges Bank working group, provides an overview of aspects that should be given weight in assessing whether Norges Bank should issue a CBDC. A CBDC can be designed in various ways, depending on the desired aims.
The working group points in particular to three possible purposes that merit further consideration:
- To ensure a public and credit risk-free alternative to deposits in private banks, in addition to cash.
- To function as an independent back-up solution for the ordinary electronic payment systems.
- To ensure the existence of suitable legal tender as a supplement to cash.
Norges Bank will continue to issue cash as long as there is demand for it. But when cash usage declines, a CBDC can be an alternative to deposit money. The primary purpose of a CBDC is to ensure confidence in money and the monetary system. It is not Norges Bank’s ambition to take over credit provision from banks. A premise underlying this work is that the existence and scope of a CBDC must not impair the ability of banks and other financial institutions to provide credit.
