Norwegian Central Bank, Norges Bank, is set to test several technical solutions for the central bank digital currency, or CBDC, after years of research.
On Friday, Norges Bank officially announced that it will conduct CBDC tests over the next two years and will follow the recommendations of an internal working group.
“The working group is of the opinion that the motivation for research into CBDCs has been strengthened. Many central banks are in the process of carrying out similar research, and several are already under way with technical testing,” the central bank stated.
According to the announcement, Norges Bank was involved in a CBDC investigation for the past four years. “Central bank cash provides the payment system with a number of important attributes that may be relevant to retain and develop further by issuing a CBDC,” said Governor Øystein Olsen “Additional knowledge is necessary for us to be able to decide whether issuing a CBDC is appropriate,” he added.
Norges Bank considered launching its own national cryptocurrency in 2018. Norway initiated the investigation of CBDCs due to a massive decline in cash usage.
The Scandinavian nation is considered to be the most cash-free country in the world, with only 4% of the country’s payments made with bills and coins.
Countries around the world are stepping up efforts to develop national digital currencies. Earlier this week, the Bank of England officially announced the start of preliminary CBDC studies that could result in the creation of a digital pound.
China and its digital yuan
China is a forerunner of digital currencies at the central bank and intends to launch the currency before the 2022 Olympics. So far six government-backed banks in China are testing e-wallet services for the upcoming digital yuan according to the local media.
This is officially known as the Digital Currency, Electronic Payment (DCEP), the Chinese digital currency is a stable state-backed currency, meaning it is always pegged on a 1:1 basis with the yuan and is issued and controlled directly by the Chinese state.
Testing for DCEP began early last year, but banks are now joining the cause. According to the report, six banks; Agricultural Bank of China, Bank of China, Bank of Communications, China Construction Bank, China Postal Savings Bank and Industrial and Commercial Bank of China, are currently testing e-wallet services for DCEP and whitelisting their users for testing.
Customers who are accepted for testing will receive their own wallets to test the DCEP service. The banks do not set criteria on requirements and applications will be reviewed on a case-by-case basis. Successful applicants will receive instructions on how to set up the digital wallet and transfer funds in and out of the application. A daily limit of 1,000 yuan, about $152, will be set to ensure control.