Excellent John K. Kumi is a cryptocurrency and fintech enthusiast, operations manager of a fintech platform, writer, researcher, and a huge fan of creative writing. With an Economics background, he finds much interest in the invisible factors that causes price change in anything measured with valuation. He has been in the crypto/blockchain space in the last five (5) years. He mostly watches football highlights and movies in his free time.
Oysten Olsen, former governor of Norges Bank, in 2021, stated that he considers Bitcoin too expensive, resource-intensive, and does not preserve stability.
A recent announcement by Nahmii has disclosed that it has been chosen by Norway’s Central Bank (Norges Bank) to create an experimental Ethereum layer 2 Sandbox for its Central Bank Digital Currency (CBDC). This is to overcome the low transaction throughput by the Bitcoin and Ethereum networks. Oysten Olsen, former governor of Norges Bank, in 2021, stated that he considers Bitcoin too expensive, resource-intensive, and does not preserve stability.
The current plan is to take advantage of the Ethereum mainnet security as it comes up with new solutions in a bid to make transactions faster and easier to control. The Ethereum mainnet is said to have a high gas fee, so the Layer-2 is preferred.
“The sandbox project includes both technical and blockchain services, where Nahmii AS will build, maintain and train Norges Bank users and partners on the sandbox environment. In addition, the Norges Bank sandbox trial is expected to include all major Norwegian banks, who will also benefit from Nahmii AS’s technical expertise,” Nahmii wrote.
Before choosing an Ethereum solution for its experiments, Norges Bank has been exploring the possibility of introducing a CBDC in the last five years as it seeks to cement its status as the world’s most cashless society. A survey conducted in 2020 disclosed that less than 4% of spending in the country during the autumn was made in cash. Ida Wolden Bache, the central bank’s governor re-emphasized at a conference in 2021 that there is a need for a secure, attractive, and effective payment system in the present and the future.
“Whether the introduction of a CBDC is an appropriate measure to promote a secure, effective, and attractive payment system and confidence in the monetary system,” said Bache. “The introduction of a CBDC is an important and complex issue. We will give ourselves the time to research the issue thoroughly, while at the same time preparing to be in a position to act if the need should arise,” she added.
She also stated that it is important to prepare CBDC for standardization and interoperability as she calls for international cooperation.
Many countries have been disclosed to be exploring CBDC following the technical advantage it could give to their financial system. In 2020, only 35 countries were reportedly considering CBDC. Interestingly, 87 countries are currently exploring it with the number expected to be higher in the future. As of now, nine countries have fully launched a digital currency, and 14 countries including China and South Korea are now in the pilot stage. These countries are expected to fully launch their digital currencies soon.
Norway’s neighbor, Sweden, is in the advanced stage of its digital currency (e-krona), and it is currently observing how its CBDC could stimulate smart payment which is said to be the future.