The central banks of Norway and England have published reports exploring different models for central bank-issued cryptocurrencies. By contrast, Federal Reserve governor, Lael Brainard, recently expressed her opposition to central bank cryptocurrencies – claiming that such would result in broad "macroeconomic consequences."

Decline of Cash Prompts Norwegian Central Bank to Consider Central Bank-Issued Digital Currency

A new report prepared by a working group of Norges Bank has indicated that Norway's central bank is contemplating the development of a central bank-issued cryptocurrency. The report states that "A decline in cash usage has prompted us to think about whether at some future date a number of new attributes that are important for ensuring an efficient and robust payment system and confidence in the monetary system will be needed," adding "If the answer is yes, a [central bank-issued digital currency (CBDC)] may be an appropriate measure."

Norges Bank identifies three specific purposes for a central bank-issued consideration that it believes "merits further consideration: […] ensur[ing] a public and credit risk-free alternative to deposits in private banks, in addition to cash[,] function[ing] as an independent backup solution for the ordinary electronic payments systems," and "ensur[ing] the existence of suitable legal tender as a supplement to cash."

The report states that "It is too early to conclude whether Norges Bank should take the initiative in introducing a CBDC. The impacts of a CBDC – and the socio-economic cost-benefit analysis – will depend on the specific design. The design, in turn, will depend on the purpose of introducing a CBDC," adding that "A CBDC raises complex issues," and "There is virtually no international experience to draw on." Norges Bank states that it "will continue to issue cash as long as there is demand for it. But when cash usage declines, a CBDC can be an alternative to deposit money. The primary purpose of a CBDC is to ensure confidence in money and the monetary system."

"Further analysis is needed to assess the purposes of a CBDC, the types of solutions that best achieve these purposes and the benefits measured against financial and other costs. This is a long-term undertaking. The aim of publishing the working group's report is to inform the public about its work, disseminate knowledge[.] and initiate a dialogue with stakeholders," the report states.