Only 4% of Norwegians now pay with cash, digital crown comes into focus

In the Corona crisis, the use of cash in Norway falls even further, making a central bank digital currency all the more attractive as an alternative.

Ida Wolden Bache, Deputy Governor of the Norwegian Central Bank, confirmed in a speech that the Scandinavian country is paying less and less in cash. In this context, she also spoke about central bank digital currencies (CBDCs) as a possible alternative.

„Only 4% of all payments are still made in cash“, as Mr Bache noted in her speech at Finance Norway’s Payments Conference. „This percentage is as high as in spring and much lower than before the pandemic,“ she said. And she continued: „As far as we know, the cash share of payments in Norway is smaller than in any other country.

The Norwegian krone, the national currency issued by the „Norges Bank“, has thus lost much of its popularity during the Corona crisis, as contactless payments are becoming increasingly important to reduce the risk of contagion.

For this reason, central bank digital currencies have become all the more popular this year, which is why the governments of many countries are already working on corresponding projects. China in particular seems to have already gained a clear lead.

In her speech, Bache therefore referred to the CBDCs as a possible alternative, as she sees „the trend of decreasing cash use especially in Norway and some neighbouring countries“.

Nevertheless, the central banker responsible for Norway’s monetary policy stresses that cash will continue to play an important role, for example if digital payment systems fail. „Cash is a recognised means of payment that is widely available“, said Mr Bache. These advantages could be lost if the Scandinavian country were to convert completely to digital currencies.

However, she clearly sees the importance of having its own central bank digital currency and says

„The question is whether something important will be lost when the cash dies out and we do not introduce a central bank digital currency. Is central bank money crucial for confidence in the monetary system? Can central bank digital currencies add value that cash does not have by offering a wider range of uses and innovation?“

Accordingly, she sees many question marks before Norway actually introduces its own digital currency. „The possible introduction of a CBDC is still a long way off“, as Mr Bache therefore summarises. And further:

„The lack of necessity reflects our view that there is no urgency to introduce a CBDC at present. The introduction of a CBDC could have major consequences in many areas, so our decision must be well considered“.“

The Norwegian Central Bank therefore intends to continue research on CBDCs, but the introduction of a Norwegian digital krone is not yet foreseeable.