Norway’s central bank sees no threat to the krone from cryptocurrencies

Ida Volden Bash, Deputy Governor of Norges Bank считает unlikely that the spread of cryptocurrencies would lead to the complete destruction of the krone, but allows broad use of digital assets by the private sector.

“I think cryptocurrencies are unlikely to make banks and the Norwegian krone redundant, but the financial system will be transformed,” she said.

According to her, the central bank sees the need for a “means of payment that provides fast, secure and affordable settlements for trade.” Therefore Norges Bank in the next two years test its own digital currency.

Bash stressed that the country’s banks are technologically far ahead and play a key role, but are already facing competition from financial-services providers, including technology companies such as Apple and Facebook.

“If currencies like Bitcoin or Diem dominate in our country, we will move closer to a new financial system,” she emphasised.

She regarded it as a radical scenario that cryptocurrencies would take a significant place in the monetary system. But even in such a case the krone would continue to circulate at least for paying taxes and fees owed to the state, Bash noted.

“With several competing currencies in circulation, we lose the krone as a common unit of account for the price of goods and services. On the simple question of how much a coffee costs, you can get a complicated answer,” Bash said.

We would have to agree on a currency of settlement for each transaction, which could be complicated by high volatility in exchange rates, she added.

Earlier, Norges Bank Governor Øystein Olsen called an unthinkable scenario, in which digital gold would replace cash.