Norway builds CBDC prototype on Ethereum infrastructure

The release of the open-source code for the country’s CBDC is the latest in the bank’s digital currency efforts spanning almost two years. The sandbox (isolated testing environment for software, applications, and programs), designed with an interface suitable for interacting with the test network and enabling functions like minting, burning and transferring ERC-20 tokens, is available on GitHub.

Nahmii, Norges Bank’s official CBDC partner has stated that MetaMask, Ethereum’s wallet, is not supported by design by the current version of the code and can only be accessed privately by users who have the appropriate credentials. The sandbox, apart from deploying the appropriate smart contracts and access controls, also includes a custom frontend, which shows a filterable summary of transactions, and network monitoring tools such as BlockScout and Grafana.

Further sandbox developments are expected to be delivered by mid-September, amongst which more complex use cases will be included. These include batch payments, security tokens and bridges and require custom smart contract work and additional front-end development, as stated by Nahmii representatives. 

The Ethereum cryptocurrency system is expected to provide an infrastructure that is necessary for the issuance, distribution and destruction of digital central bank money, referred to as DSP, as detailed by the Norges Bank in May 2022.

In April 2021 it was reported that Norges Bank had officially announced their plans to conduct testing on CBDC solutions, an initiative following the decline in cash usage, with only 4% of payments being conducted with cash.

CBDCs in the global space

In recent years, more than half of the world’s central banks have started researching and experimenting with CBDCs, with nearly 100 CBDCs in research or developmental stages as of July 2022. 

Amongst these is Sweden’s central bank, Riksbank, which has a proof of concept developed and is exploring further CBDC technology and policy implications that come with it, whereas in China, the e-CNY (digital yuan/renminbi) is used by more than a hundred million users, billions of yuan in transactions having already been made.

Two countries have already launched CBDCs: eNaira, launched in Nigeria in October 2021, and the Sand Dollar, launched in the Bahamas in October 2020.

The European Central Bank (ECB) is also exploring the possibility of issuing a CBDC, the digital euro. European Union officials have stated that in its first stage, the digital euro will be enabling payments made only by people, with businesses not being able to issue invoices or paychecks. It is expected that in its first stage of release, there will be three use cases: peer-to-peer payments, consumer-to-business payments, and payments to/by the government. Decisions on whether the CBDC will be issued or if it will use blockchain technology have not yet been made, but a bill enabling digital alternatives to cash payment is expected to be published early in 2023.