Ida Wolden Bache: FinTech, BigTech and cryptos – will new technology render banks obsolete? Speech by Ms Ida Wolden Bache, Deputy Governor of Norges Bank (Central Bank of Norway), Oslo, 11 May 2021. * * * Accompanying charts of the speech. Introduction “No state can endure without a well functioning monetary system.” The quote comes from the Constitutional Assembly at Eidsvoll in 1814.1 At that time, it was imperative to restore the monetary system and establish our own national currency. Two years later, Norway saw the birth of its first bank – Norges Bank. For many years, it was the country’s only bank. Today, more than 200 years later, Norges Bank is the bankers’ bank and forms the core of a network of small and large banks spread throughout the country. But the number of physical premises is steadily declining, and our national currency – the krone – is predominantly a number on a screen rather than a physical handheld object. And if things develop as some might believe, tomorrow’s financial system will not be made up of banks, central banks and national currencies – but of electronic signals that transfer cryptocurrencies – from one digital wallet to another. To quote a well know Norwegian businessman: “The direction is clear: finance will be disrupted as surely as fossil fuels will be. The question is not if, but when. "2 I think there is little chance that cryptocurrencies will make banks and Norwegian kroner obsolete anytime soon, but the financial system will change.
Important work is underway at an international level to adapt regulation, supervision and oversight to the new landscape. Norges Bank supports this work. Two of the main considerations are that society as a whole must reap the benefits of the new solutions, while the associated risks must be contained. We also want to be a driver behind changes that enhance the efficiency and safety of the payment system. An example is the work on developing real-time payment solutions, which today allow payments to be sent within seconds to the payee’s account. We are also considering whether Norges Bank should take on a more operational role in the real-time payment infrastructure. In our work, we have to take a precautionary approach and keep a close eye on the potentially far-reaching implications for the financial system of some of the changes underway. We must ask ourselves whether measures will be needed so that we can continue making payments in Norwegian kroner efficiently and securely in the future. Chart: Central bank digital currency A key issue is whether Norges Bank should launch a central bank digital currency (CBDC).13 Unlike central bank reserves, which is electronic money for use solely by banks, a CBDC will be available to everyone, just like cash. And unlike e-money platforms or cryptocurrencies, a central bank will stand behind it and guarantee its value. If we introduce a CBDC at some point in the future, the purpose will be to safeguard confidence in the monetary system and to promote an efficient and secure payment system.