In the eurozone, the digital euro is in its development phase, and elsewhere in Europe, Norway is in a testing phase. "The motivation for embarking on the study of CBDC is found in Norges Bank’s mandate, in particular, our task to promote an efficient and secure payment system. Of course, a well-functioning payment system in the domestic currency is also important for monetary and financial stability," said Torbjørn Hægeland, Executive Director for Financial Stability at Norway’s central bank, Norges Bank. Another reason for exploring CBDCs, he said, is the public’s access to credit risk-free assets or a means of payment - and a contingency "if the electronic payment system breaks down at least as a last resort".
Norway’s CBDC project has been in the works since 2016 but there is no guarantee if it will actually be launched. Hægeland said this experimental phase of trial and analysis will last until June 2023 and will “form the basis for our recommendation on how we should then go forward into an eventual next phase from next summer”. The next phase would be to issue a recommendation on whether CBDCs are worth testing as a prototype. The project will delve into the technology needed and policy-related questions and aims to improve cross-border payments by reducing costs and improving speed.
The benefit of CBDCs is that they are governed by central banks, meaning that they are meant to be stable. As Norway is not part of the European Union but part of the European Economic Area (EEA), there is an unresolved question as to whether Norway would follow EU regulations and rules on CBDCs. Financial stability is at the core of the central bank and so testing out a CBDC system is not an area where you can move fast and break things because it can be messy to clean up. "CBDC is not a goal in itself. The goal is to ensure an efficient, safe and attractive payment system in Norwegian kroner also in the future," Hægeland added.