In the past few months, there have been a flurry of reports indicating that a growing number of central banks around the world are researching the potential benefits of issuing their own digital currencies. Norway’s central bank, Norges Bank, has been giving serious thought to cryptocurrency as well, as evidenced by statements from Norges Deputy Governor Jon Nicolaisen at a recent gathering of the Norwegian Academy of Science and Letters in Oslo.
In remarks focused on the issue of what form future money should take, Mr. Nicolaisen addressed issues like the increase of cybercrime in recent years and the potential benefits and drawbacks of private cryptocurrencies. He also spent a good portion of the speech defining money, explaining how it is created, and discussing the factors involved in ensuring its stability.
Nicolaisen also offered insight into the rise of new currency forms and payment systems, including payment card schemes like Norway’s BankAxept, electronic money systems like PayPal, and even in-game currency systems like those used by Blizzard’s online gaming platforms. Finally, he noted the rise of private digital currencies, including Bitcoin:
“The largest and best-known digital currency is Bitcoin, which was launched in 2009. Bitcoin has been the subject of widespread debate, but still has only a minor role in the payment system. Payment by Bitcoin is costly, and the system’s capacity is limited. Bitcoin prices have been highly volatile. A characteristic of private currencies such as bitcoin is the absence of any central institution backing the currency. But this is also a problem, making it difficult to establish the trust necessary for a widespread adoption of these currencies.”
The Deputy Governor highlighted the potential benefit that private cryptocurrencies could provide as a safeguard for consumers in the event of a cyberattack that shut down a nation’s banking system, noting, “These currencies can also be used even if banks’ systems fail – as long as the Internet is still functioning.”
Because those currencies lack any official backing and can be risky to use, however, Nicolaisen suggested that central banks could possibly introduce their own electronic currency:
“For many consumers, electronic central bank money could provide an alternative to deposit money in a bank, as cash does today. Banks can attract deposits through the interest rates they offer. But their ability to create money and extend credit could nonetheless be affected, especially if this new form of electronic money enters into widespread use.”
On the central question of what form Norway’s money and payment systems should take in the future, Nicolaisen noted that such questions would be settled only through broad consensus and future legislative action. Whatever that ultimately looks like, one thing is clear: Norway’s central bank is determined to be ready for whatever role it’s asked to play.