CBDC is a digital form of central bank money issued by Norges Bank. We distinguish between retail CBDC, which can be described as digital cash, and wholesale CBDC, which can be compared to banks’ deposits with Norges Bank (central bank reserves).

Norges Bank is assessing CBDC in order to be prepared to issue such money should it become necessary to ensure that the Norwegian payment system remains secure, efficient and attractive for making payments in Norwegian kroner in the future.

Norges Bank has looked into how CBDC can contribute to an efficient and secure payment system. In this work, the Bank has assessed various arguments that have been put forward for introducing CBDC. Norges Bank has concluded that there are currently more cost-effective ways of achieving the potential benefits than introducing CBDC.

Read more about the reasoning here

It is unlikely that a digital euro would significantly reduce the use of Norwegian kroner. Its use will probably be limited to certain tourist areas and have little effect on the efficiency of the system as a whole.

Although both CBDCs and cryptocurrencies are recorded on blockchains, these are two entirely different types of instruments. The value of cryptocurrencies is determined by supply and demand in the market, and they do not necessarily represent claims on an issuer. CBDCs, on the other hand, are claims on the central bank that issues the money. The value is linked to the national currency and is backed by the state through the central bank.

CBDCs are claims on the central bank and are therefore free from both counterparty risk and market risk. Stablecoins are issued by a private entity. Although there is a requirement that the stablecoins issued must be backed by other assets such as bank deposits, securities or central bank deposits, they are still a somewhat more uncertain form of money than CBDCs.

So far, central banks in a few countries in other parts of the world have issued retail CBDCs, namely Jamaica, Nigeria and the Bahamas. In addition, an extensive pilot project is underway involving CBDCs issued by the People’s Bank of China (the Chinese central bank). No central bank has so far issued a wholesale CBDC. However, several central banks in financial centres across different parts of the world have pilot projects that include wholesale CBDC.

Norges Bank has taken the view that the central bank should not have access to information about individuals’ payments and holdings. However, payments and holdings of CBDCs will likely be subject to the same control requirements as other payments, including those against money laundering and terrorist financing.