Norway Going Cashless with Its Own Digital Currency

Norges Bank, Norway's central bank, has made a huge step forward in its quest to create a digital currency by revealing the open source code for the country's central bank digital currency (CBDC) sandbox, which is based on Ethereum technology. The ongoing mass deployment of cryptographic technologies enabled this advancement.

Norway, Israel, and Sweden will join Project Icebreaker in late 2022. Every government in the world is attempting to develop its own Central Bank Digital Currency (CBDC) as a means of adopting cryptocurrencies. Norway, a Scandinavian country, has also entered the competition. Despite its 22 blockchain solution providers, the small Nordic country does not stand out in the list of worldwide crypto providers. Since 2016, the country has been working on its CBDC.

In recent years, there has been a considerable increase in cashless payment alternatives. Because of the increase in cash-enabled illegal operations, some Norwegian banks have eliminated the cash option.

Trond Bentestuen, an executive at the big Norwegian bank DNB, advocated a halt to cash payments in the country in 2016, saying:

“Today, there is approximately 50 billion kroner in circulation and Norges Bank can only account for 40% of its use. This means that 60% of that money usage is outside of any control.”

Nordea, another large bank in the country, declined to accept cash in 2015, with only one branch in Oslo Central Station permitted to do so. At the same time, there is BTC euphoria, and DNB allows its customers to buy Bitcoin via mobile apps. Furthermore, the local court ordered that the convicted drug dealers pay their fines in cryptocurrency; this topic was prominently covered by local news outlets as an investment opportunity in digital assets.

Norwegian CBDC is still an experiment that will last until June 2023. It will conclude with recommendations from the central bank if the prototype is to be implemented.

Related Read: India's and G20's involvement in cryptocurrency regulation

Ethereum Backed CBDC

Norges Bank released the open-source code for the Ethereum-backed digital currency sandbox in September 2022. Although the second half of the code was intended to be made public by mid-September, no progress has been made. A blog article stated that

"The usage of open-source code, in the beginning, was not a hint that the technology would be built on open-source code, but rather a good starting point for learning as much as possible in conjunction with developers and alliance partners."

Rather than the public Ethereum ecosystem, the Norwegian CBDC's test network now employs a private version of the corporate blockchain Hyperledger Besu.

In late 2022, Norway joined Project Icebreaker, a collaboration between the central banks of Israel, Norway, and Sweden to integrate their domestic proof-of-concept CBDC systems. The project's final report is due in the first quarter of 2023.

Also Read: LBRY Vs SEC: Calling for Better Crypto Regulations

Global Adoption of CBDC

Nigeria

Last October, Nigeria became the first African country to establish a CBDC. The eNaira is stored in a digital wallet and can be used for in-store contactless payments as well as money transfers.

The eNaira wallet has around 700,000 downloads by the end of January 2021.

Nigeria has a population of approximately 219 million people. According to the Nigerian media outlet Stears Business, 90% of Nigerians own mobile phones, but just 10%-20% own smartphones, which are required to utilize the eNaira.

The user must also have a national identity number to utilize the eNaira (NIN). This has resulted in criticism. CBDC supporters claim that they will reach out to folks who do not have a bank account.

Eastern Caribbean Currency Union

Eastern Caribbean Union countries developed their digital currency to assist speed up transactions and serve those without bank accounts.

Antigua and Barbuda, Dominica, Grenada, Montserrat, St. Kitts and Nevis, Saint Lucia, St. Vincent and the Grenadines are the seven countries engaged.

Anguilla was the only country in the union that chose not to participate.

According to the Eastern Caribbean Central Bank, "DCash" is the first blockchain-based currency adopted by any of the world's currency unions, though other individual states already have similar systems in place.

Sweden

Sweden is experimenting with a digital currency known as the e-krona. There are intentions to progress the testing from simulated participants to an environment with external participants.

Riksbank in Sweden has created a proof of concept and is investigating the technology and policy implications of CBDC.

One of the project's primary goals is to secure future widespread access to the e-krona. It wishes to protect the elderly and people with specific disabilities from the negative effects of a cashless society.

China

In April 2020, China became the world's first large economy to test a digital currency. In 2022, the People's Bank of China hopes to see widespread domestic use of the e-CNY or digital yuan.

According to the IMF, it currently has over a hundred million individual users and billions of yuan in transactions.

Currently, the country is offering digital yuan payment services to guests at the Beijing Winter Olympics, which began last week. Visitors can deposit their money on a real card or download the digital yuan wallet app.

CBDC FAQs

Which countries have launched CBDC?

The Bahamas introduced CBDC with Sand Dollar in October 2020, followed by Nigeria with eNaira in October 2021. In June 2022, Jamaica launched JAM-DEX. Currently, three nations have legalized CBDC.

Which institution is leading the cross-border CBDC project?

The Monetary Authority of Singapore (MAS) introduced Ubin, an expanded engagement with international partners on cross-border FX settlement using wholesale central bank digital currency (CBDC).

Which blockchain will be used for CBDC?

CBDCs operate on authorized (private) blockchains, whereas cryptocurrencies function on permissionless (public) blockchains.