Norway Is Close To Releasing A CBDC And Totally Remove The Use Of All Cash

The Scandinavian nation of Norway is far ahead of most nations in releasing their own central bank digital currency (CBDC), with some speculating if the CBDC will be ready and introduced to the public by late-2023.

Norway, just like their next door neighbor Sweden, are nearly cashless already and rely very heavily on digital transactions and biometrics.

In June of last year Norway announced that they will be collecting the receipts of all food and grocery purchases, as the nation transferred to a new digital ID system that can better track and store people’s data.

SEE: Norway’s Banks Will Now Replace Mobile Web Interfaces With International Biometric ID System

As noted in a recent report by Cointelegraph, some Norwegian banks have removed cash options already. In 2016, Trond Bentestuen, a former executive at the Norwegian bank DNB, proposed to stop using cash as a means of payment in the country:

Today, there is approximately 50 billion kroner in circulation and [the country’s central bank] Norges Bank can only account for 40 percent of its use. That means that 60 percent of money usage is outside of any control.

Bentestuen said at the time

And in 2015 another large bank, Nordea, also did not want to accept cash, leaving only one location in Oslo Central Station to continue holding physical tender.

Norway was quick to hop on the crypto hype. DNB has been allowing customers to purchase Bitcoin through their unique banking app, local courts ordered convicted drug smugglers to pay their infractions with crypto, and even local newspapers encouraged residents to make investments with digital assets.

Torbjørn Hægeland, executive director for financial stability at Norway’s central bank, Norges Bank, outlined to the country’s plan to fully transition away from cash in 2022, Euro News reported.

With this background, the decline in cash use and other structural changes in the payment system are key drivers for the project.

He said at the time

The pilot for the Norwegian CBDC will continue until June of this year and will end with suggestions from the central bank if the nation should implement a prototype if necessary.

Cointelegraph explained that similar source coding for the second largest cryptocurrency, Ethereum, is key for the functionality of this CBDC foundation. The outlet wrote:

In September 2022, Norges Bank released the open-source code for the Ethereum-backed digital currency sandbox. Available on GitHub, the sandbox is designed to offer an interface for interacting with the test network, enabling functions like minting, burning and transferring ERC-20 tokens.

However, the second part of the source code, announced to go public by mid-September, has yet to be revealed. As specified in a blog post, the initial use of open-source code was not a “signal that the technology will be based on open-source code,” but a “good starting point for learning as much as possible in collaboration with developers and alliance partners.”

Earlier, the bank revealed its principal partner in building the infrastructure for the project — Nahmii, a Norway-based developer of a layer-2 scaling solution for Ethereum of the same name. The company has been working on this scaling technology for Ethereum for several years and has its own network and tokens. At this point, the test network for the Norwegian CBDC uses not the public Ethereum ecosystem, but a private version of the enterprise blockchain Hyperledger Besu.

In late 2022, Norway became part of Project Icebreaker, a joint exploration with the central banks of Israel, Norway and Sweden on how CBDCs can be used for cross-border payments. Within its framework, the three central banks will connect their domestic proof-of-concept CBDC systems. The final report for the project is scheduled for the first quarter of 2023.

Entrepreneurs and investors believe that once their CBDC is implemented it would most likely spell the end for most other decentralized exchanges in the country.

Despite the country’s strong infrastructure for entrepreneurs in other industries, such as low energy costs and free education, these benefits do not extend to the digital realm. The tax burden faced by digital companies makes it nearly impossible to compete with businesses based in more business-friendly jurisdictions.

The Norwegian central bank’s CBDC project can also pose a threat to the legal status of private stablecoins in the country. The introduction of a CBDC may prompt increased regulation and oversight of private stablecoins, making it harder for these companies to operate.

Norwegian serial entrepreneur Sander Andersen, who moved his fintech company to Switzerland recently, told Cointelegraph in a statement

However, Michael Lewellen, head of solutions architecture at OpenZeppelin, a company contributing its contracts library to the Norges Bank project, told Cointelgraph that it’s not as cut and dry as that, and the CBDC and other coins could still be used if they are operating on the same compatible token standards like ERC-20.

Cointelegraph wrote: ‘However, from a policy perspective, there’s nothing that can stop central banks from performing financial gatekeeping and enforcing the Know Your Customer (KYC) standards, and this is where the CBDC looks like a natural development. Banks will not sit idly by as the blockchain ecosystem grows, as there is a lot of shadow-banking activity happening on-chain,’ Lewellen explained.

CBDCs offer central banks the ability to better perform gatekeeping and enforce KYC rules on CBDC holders, whereas enforcing the same standards against entities using non-governmental stablecoins is far more challenging.

Lewellen added

‘Any national digital currency would almost certainly require every address to be linked to an identity, using KYC and other means we see in banks today. In fact, if done on the private ledger, like the one that Norges Bank is testing right now, the CBDC will offer not only less privacy for a single customer, but at the same time less public transparency with regard to blockchains,’ Cointelegraph said.