Erik Strand, 22.05.23
There has been warnings about the hazards of implementing Central Bank Digital Currency (CBDC). Warnings should however be substantiated. In the following, I will refer to what a Norwegian Bank says about CBDC on its website.
The article, in Norwegian, can be found here. There has however been some problems with the link. I have not been able to share it on Twitter. So an alternative way to access the article is using this link and then choose the title “Hva er digitale sentralbankpenger (DSP) SpareBank 1 SR-bank”. I have saved a screenshot of the article as well as the text, in case it disappears.
In the article, the Innovation manager of the Norwegian bank SpareBank 1 SR-bank, Ramtin Matin, explains what CBDC might be in the near future. He offers a short and a long explanation. I will not refer to technicalities like blockchains, but what Ramtin Matin says about the possible uses of CBDC is interesting.
His short explanation of CBDC is that CBDC is “smart cash that can be programmed for quite many cool things”. The reader can judge how cool he/she thinks these things are.
Ramtin Matin explains that CBDC, like cash, will constitute a claim on the Norwegian Central Bank (Norges Bank). In other words, CBDC will be an alternative to the cash we know today. He states that the Norwegian Central Bank probably does not consider CBDC as a means of storing values.
When asked about which value the CBDC will have, Matin answers that the intention is that CBDC shall have the same value as the Norwegian krone. Therefore, he continues, the Norwegian Central Bank has to impose restrictions which make it less attractive for people to speculate or store large values in digital cash.
When asked about what CBDC will mean for the banks, Ramtin Matin answers that we do not know yet. Norges Bank is examening what consequences CBDC might have. What we know is that we will be influenced in one way or another. CBDC might contribute to decrease the volume of bank deposits. He adds that this may have huge potential consequences.
The interviewer proceeds to ask Matin about which possibilities CBDC represents for banks and customers. Matin says that Norges Bank will be in charge of creating the digital money, but they plan to allow for third parties, like banks, to devellop so called “smart contracts”.
Ramtin Matin then explains “smart contracts”:
“Yes, it is really exciting. As CBDC is an electronic entity, it will be possible to program them to have certain traits. This opens up for an ocean of new ways to think payment. We can have travel insurances that do not start before one is at the airport, or car leasing which is paid when one sits in the car. We can program money so that they cannot be used on betting or candy, or we can say that the money used for buying a house shall be transfered when the customer is pleased, without using a broker. Or how about money that can only be used within a certain time limit? They have already tested that in China.”
Fampo 