CBDC in the Nordics: What is the status in Sweden, Denmark, Norway, Finland and Iceland?

Central bank digital currency (CBDC) is an exciting area of development from many central banks across the world, particularly in the Nordics. Some countries within the Nordics have taken the lead on these developments, while others remain more sceptical over how the benefits outweigh the risks.

Sweden

Sweden is Nordic country that has seen the most development with their CBDC. Swedish central bank Riksbank started investigating CBDCs in 2017, and in 2020, Phase 1 of the e-krona project started. Phase 2 of the project concluded in 2022.

In 2023, the Riksbank revealed they would be working on:

• Investigating the effects of an e-krona on the Swedish economy; 
• Testing of the technical solution for the e-krona prior to the e-krona pilot focusing on offline payments and sustainability; 
• Investigating whether and how an e-krona affects the Riksbank's current mandate and what legal amendments are needed for the Riksbank to issue an e-krona; 
• Having a dialogue with different authorities and the market, for example, via the external dialogue forum launched in 2022;
• Performing user studies aimed at end-users and traders;
• Preparing for a possible procurement of an issuable e-krona.

Denmark

Denmark remains sceptical. In 2016 and 2017, the central bank of Denmark conducted research, but determined that digital currencies would pose significant legal, financial, and administrative challenges with no clear benefits for Danish society.

In June 2022, a paper was published that analysed new types of digital money, including CBDC. However, the sentiment remained unchanged.

Regarding retail CBDC, the report concluded: "At present, and with the associated costs and possible risks, it is not clear how retail CBDCs will create significant added value relative to the existing solutions in Denmark. With new technology, however, it is often the case that it is not clear from the outset how and to what extent a new solution will create value."

Norway

In April 2021, Norges Bank announced its plans to test a host of technical options for a CBDC over the next couple of years.
Following this, in September 2022, Norges Bank started working with the Bank for International Settlements to explore how CBDCs can be used for international retail and remittance payments.

Additionally, Norges Bank made the source code for its CBDC sandbox publicly available and confirmed that the prototype infrastructure for the project is based on Ethereum. As it stands, this sandbox is only available for those with correct credentials and transactions are private.

Finland

As the only Nordic nation that transacts with the Euro, Finland has the advantage of being able to rely on some of the investigations into the Digital Euro.

The ECB started working on the Digital Euro back in 2021, and in October 2023, will announce whether they will start a 'realisation phase' to develop and test the appropriate technical solutions and business arrangements necessary to provide a Digital Euro. Most recently, the ECB announced the possible development of a basic Digital Euro app.

Iceland

In 2018, the Central Bank of Iceland released a paper looking at the advantages and disadvantages of a CBDC for Iceland. The paper investigated the purpose of a CBDC, the impact of a CBDC on monetary policy, and the potential regulatory framework.

The paper concluded: "The time is right to open discussions of this topic and to assess the need to digitise cash by issuing a rafkróna in Iceland. Rapid market developments and technological advances are revolutionising conventional retail payment intermediation." Despite such an early investigation, there has since been no public announcement of any development in this area.

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