Norway Going Cashless With CBDC

The Scandinavian nation has been working on CBDC since 2016.
Major banks in the country have refused cash payments.
Norway, along with Israel and Sweden, to be a part of Project Icebreaker in late 2022.

Every country worldwide is trying to implement its Central Bank Digital Currency (CBDC) as a mode to adopt cryptocurrency. The Scandinavian nation Norway is also entering the race. However, the small Nordic country does not stand tall in the list of global crypto providers, even with its 22 blockchain solution providers. The country has been working on its CBDC since 2016.

Towards the Cashless

There has been a noticeable rise in cashless payment methods in recent times. The rise in cash-enabled unlawful transactions has caused some Norwegian banks to remove the cash option completely.

An executive at a major Norwegian bank DNB, Trond Bentestuen, proposed in 2016 proposed a halt in cash payment in the country, 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.”

In 2015, another major bank in the country, Nordea, refused to accept cash, with only one branch in Oslo Central Station allowed to handle cash. At the same time comes BTC enthusiasm, while DNB allows its customers to use mobile apps to buy Bitcoin. Also, the local court demanded that the fines be paid in crypto by the convicted drug dealers; this issue was widely discussed as an investment opportunity in digital assets by local news agencies.

Norwegian CBDC is still experimental and will continue until June 2023. It will end with recommendations from the central bank if the implementation of the prototype is required.

Norges Bank, in September 2022, released the open-source code for the Ethereum-backed digital currency sandbox. Although the second part of the code was supposed to go public by mid-September, there has been no progress in that area. According to 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.”

Currently, the test network for the Norwegian CBDC uses a private version of the enterprise blockchain Hyperledger Besu rather than the public Ethereum ecosystem.

Norway became a part of Project Icebreaker in late 2022, a joint exploration with Israel, Norway, and Sweden’s central banks to connect their domestic proof-of-concept CBDC systems. In the first quarter of 2023, the project’s final report is expected.

Problems with CBDC

Though CBDC is considered a natural evolution over the traditional banking system, banks want to be a part of the blockchain ecosystem, as many shadow-banking activities are happening on-chain. Moreover, there are strategic and technological concerns regarding users’ privacy. And no mature solution exists that could allow privacy regarding CBDC.

CBDCs would require every address linked to an identity. And even if this is done via a private ledger, this offers even less privacy and lesser public transparency concerning blockchains.