Preparing for a future that is powered by digital currencies, the Central Bank of Norway released a framework on May 21, 2018, describing a state-issued cryptocurrency.
Titled “Central Bank Digital Currencies,” the 55-page report goes on to detail several factors, mechanisms, and considerations involved in creating a “robust and efficient payment system,” citing the diminishing need for cash in the world’s 62nd largest country.
As stated, the primary objective of the Central Bank Digital Currency (CBDC) paper is to incite public discussions based on the currency’s societal function, use of personal information, and everyday utility.
The paper outlines the following aspects that correspond to the end goal:
– Ensuring a credit and public risk-free alternative to cash and bank deposits.
– Serving as a backup currency which independently operates along with the traditional electronic payment systems. ordinary electronic payment systems.
– To function as legal tender, as a supplement to credit cards and cash.
– To ensure anonymity; safeguarding user privacy in terms of spending, a feature that the current banking system does not offer.
– Making the system easy-to-use and access, requiring no technical knowledge on the user’s behalf to support the spending of CBDCs
The paper further discusses factors that could augment demand for CBDCs, for both payment and value-added services, such as ensuring a simple process for converting the state-issued digital coins to a legal bank deposit and vice-versa.
Additionally, it describes the use of distinct models: an account-based storage model that is centralized for security purposes and stored on a database, a value-based model that is wholly decentralized and stored on electronic chips, and a hybrid model which combines the two and would have the government overlooking the protocol and acting as a steward; much like the Ethereum Foundation’s role with ether.
Drawing caution to the proposed system, the paper’s researchers mention:
A CBDC raises complex issues. There is virtually no international experience to draw on. Further analysis is needed to assess the purposes of a CBDC, the types of solutions that best achieve these purposes and the benefits measured against financial and other costs.
In conclusion, the report notes that it may be “too early” to introduce a state-issued digital token, as the underlying technology is still “immature,” and in its nascent stages. However, the group did not find any immediate threat with the premise, which could impede the development.
Norway’s Paper on State-Issued Digital Currencies can be accessed here.
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Last modified: May 20, 2020 8:44 PM UTC