How Norway’s central bank is experimenting with its own digital currency

Could Norway replace cash witha digital currency?
Could Norway replace cash witha digital currency? Copyright Norges Bank
By Pascale Davies
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Norway’s central bank tells Euronews Next more about its experiment with a national digital currency.


A cashless society may not seem so far away in the distant future. But the current digital alternatives such as cryptocurrencies have proved volatile, while the other blockchain assets, non-fungible tokens (NFTs), have fallen out of favour since their hype.

A different approach to blockchain payments is gaining traction around the world. Central Bank Digital Currencies (CBDCs) are more stable, but unlike cryptocurrencies, they are centrally controlled by governments, more specifically central banks, and are not seen as a way to invest money. 

While CBDCs and cryptos like Bitcoin may share the same blockchain technology, the biggest difference is that CBDCs are centralised and traceable, while cryptos are not.

Several countries have launched their own CBDCs, such as Nigeria in 2021. 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.

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

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".

The CBDC experiment

Norway’s CBDC project has been in the works since 2016 but there is no guarantee if it will actually be launched.

The consequences of a CBDC are very much dependent on the design. Getting the design right is basically the main challenge of the project.
Torbjørn Hægeland
Executive Director for Financial Stability, Norges Bank

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. But Norway is also exploring cross-border CBDCs.

On September 28, Norway, Sweden and Israel’s central banks announced they were joining forces with the Bank of International Settlements (BIS) to explore CBDCs.

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.

If CBDCs are the future of payment and they prove successful it will benefit everyone, according to Hægeland.

"Cash contributes to some valuable characteristics of the payment system that benefits all - even if some use them more intensively than others. Independent payment contingency is important. And the potential access to a credit risk-free payment alternative that can be used by all provides trust in the payment system," he said.

"We analyse whether introducing a CBDC as a supplement to cash can ensure the continued existence and further development of such characteristics," Hægeland continued, adding that the introduction of CBDC should not fundamentally change or erode the business model or the banks' role to provide credit.

Norges Bank
Image of Norges Bank in OsloNorges Bank

How would CBDCs be regulated in Norway and will they be stable?

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.

"The issuance of central bank money, whether it be cash, CBDC, or reserves held by banks, is governed by the Central Bank of Norway," said Hægeland.


"CBDC as a means of payment would move around in a payment solution that would have connections to other parts of the payment system.

"Norway is regulation-wise bound by the EEA agreement and must comply with the fundamental principles of that agreement and EU rules for the internal market".

While the central bank would be responsible for the insurance of CBDCs, third parties may have to be used to make the user interface, which would be covered by the EU’s Payment Services Directive and other types of regulation, Hægeland said.

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.

"The consequences of a CBDC are very much dependent on the design. Getting the design right is basically the main challenge of the project if Norges Bank and political authorities decide to move forward with introducing a CBDC," said Hægeland.


"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," he added.

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