Cashless Norway
Last year’s research by Arcane Research and Ernst & Young shows that 420,000 Norwegians own cryptocurrencies. That’s 10% of the population. Adoption is progressing very quickly here because the interest is also very high. Most of the cryptocurrency owners in Norway are young people (this is a group of people under 40). Women are making up an increasing number of this pool. The most popular cryptocurrency here is of course Bitcoin. Two-thirds of all digital money holders invest in it.
The general interest can also be seen even on the example of the start of work on the digital national currency, as they began already in 2016. That is, they were taken at the earliest in the world.
It is also worth mentioning that Norwegians have been moving away from cash payments for a long time. And many banks, out of fear of illegal cash transactions, have largely disabled cash options. One of Norway’s largest banks, Nordea, refused to accept cash for its customers. There is only one branch in Oslo that accepts cash payments.
Already in 2016, Trond Bentestuen (then the director of a large DNB bank) proposed to stop using cash, stating that there are 50 billion crowns in circulation, of which 40% is used by the national central bank Norges Bank and 60% is beyond any control. It should be mentioned here that DNB indirectly contributed to the development of the digitization of money in Norway by offering its customers to buy Bitcoin via a mobile application.
After that, things took a turn for the worse. Newspapers wrote about the possibilities of investing in cryptocurrencies, and courts sentencing drug dealers demanded payment of fines in cryptocurrencies. This only drives the project of the Norwegian CBDC. It is planned to complete the experimental phase by the end of June 2013. It is to end with the recommendation of the central bank and the decision whether it will be necessary to implement the prototype.
The open source code for the Norwegian cryptocurrency is now available until September 2022. It is backed by Ethereum. It has been designed to enable the functions of minting, burning and transferring ERC-20 tokens. We don’t know the second part of the code yet. It is to be revealed in the second half of September this year. However, we know a partner in building infrastructure. It is the Norwegian developer Nahimia. This company has been working on scaling technology for Ethereum for several years now and even has its own network and tokens.
At the moment, the test network for the Norwegian CBDC uses a private part of the Hyperledger Besu corporate blockchain.
The functionality of the Norwegian CBDC is also being worked on. Norway has joined the Icebraker project, which connects the central banks of Israel, Norway and Sweden to be able to use the cryptocurrency for cross-border payments in the future. As part of this project, the three countries will connect their proof-of-concept CBDC systems. A report on this project is scheduled to appear in the first quarter of 2023.
As usual, everything looks very good on paper. However, there are still problems that will be difficult to overcome. Because despite advanced projects in the blockchain industry, Scandinavian countries are still very cautious about adopting digital money and completely abandoning fiat money. The Norwegian tax system means that taxes on digital assets are still very high and the crypto ecosystem is not yet so advanced as to be able to move only within cryptocurrencies. In addition, companies in the digital industry do not have such reliefs as are available to other entrepreneurs. These include free education and energy costs. This makes it practically impossible to compete with companies that are in the circle accepted by government institutions.
Entrepreneurs also see unequal competition between bank-owned digital currency and private cryptocurrencies. Private stablecoins may not have as much leeway due to pre-imposed regulation and strict oversight. Including enforcing KYC rules against CBDC holders and holders of non-government coins. In fact, at the moment there is no solution that will ensure the privacy of SBDC users in accordance with the requirements.
According to observers, the use of a private ledger for the project, which is now being tested by Norges Bank, will not only reduce the privacy of an individual client, but also reduce the public transparency of blockchain flows.
It can be said that despite the great commitment and momentum of the work on the project, the same problems appear as in any case of work on the CBDC.
However, it cannot be denied that Norway is not only preparing for the adoption of cryptocurrencies, but also opening wide door to BTC miners. Not only is it a politically stable country where mining can be banned overnight, but there is also a strong emphasis on renewable energy sources. This is an extremely important issue considering the electricity consumption to power cryptocurrency excavators. In Norway, the main source of energy is hydroelectric power plants, which account for 88% of energy production, the remaining 10% is wind and only 2% of energy is produced from natural gas. It is therefore not surprising that relatively small Norway has a hashrate production of 0.77% on the Bitcoin network.
