Cash is Out: Norway’s Shift Towards Central Bank Digital Currency (CBDC)

The Decline of Cash Payments

In a recent address at Finance Norway’s Payments conference, Deputy Governor Ida Wolden Bache revealed that cash payments in Norway have hit a new low. With only 4% of transactions being made in cash, it seems people prefer to keep their coins in their piggy banks rather than in their pockets. This statistic has remained stable since spring and significantly decreased compared to the pre-pandemic era. In fact, Bache asserts this cash usage rate is lower than anywhere else in the world.

COVID-19 and the Rise of Digital Transactions

The decline in cash can be largely attributed to pandemic-related concerns. With COVID-19 highlighting the need for hygiene, many countries, including Norway, began to rethink the necessity of physical currency, which is often exchanged hand-to-hand. If cash is becoming the new hot potato, then digital currencies are the cool, touchless alternative. The pandemic has hastened the acceptance and usage of digital payment systems, leaving cash waving goodbye.

Central Bank Digital Currencies Explained

With the global conversation inching closer to the introduction of Central Bank Digital Currencies (CBDCs), a trend that emerged prominently in 2020, Norway is contemplating its own digital coin. Bache pointed out that other countries are already testing their digital assets—take China, for example, which has been making strides in CBDC testing. However, this shouldn’t rush Norway into a decision; the transition to a digital currency requires thorough understanding and planning.

The Pros and Cons of Going Cashless

Bache did not shy away from discussing the vital roles that cash plays, mainly its accessibility and its status as legal tender—features that could be compromised with an entirely digital system. She posed some thought-provoking questions: Would society lose something essential if cash were to die out? Is the confidence in monetary systems reliant on the availability of cash? And can CBDCs truly offer advantages that cash cannot, such as better functionality and innovation?

The Path Forward: Caution in Acceleration

As Norway’s central bank continues its research into the implications of implementing a CBDC, Bache emphasized the importance of a well-informed decision. There is no immediate rush to introduce a digital currency, as policymakers believe the current need is not acute. The introduction of a CBDC could bring about significant consequences, and the central bank is taking its time to navigate this transformative landscape carefully. Meanwhile, other nations, including Brazil, have been vocal about their progress towards launching their own digital currencies.