Danish Central Bank Not Likely to Implement a CBDC

While other countries are exploring possibly implementing their Central Bank Digital Currency (CBDC), Denmark has declared a lack of immediate interest in issuing a digital krone.

Signe Krogstrup, one of the three governors of the Danish central bank, generally known as Danmarks Nationalbank talked about a recent surge in the use of digital payment in the region and its effect on the global economies.

Unlike other regions with fears that a gradual decline in cash usage would pose a threat, the Danish central bank holds a different opinion.

“As already noted, based on what we know today, it is not clear to me that cash in the hands of private citizens is the anchor of trust in our monetary system, certainly not in Denmark,” at the same time, digital assets are “speculative and high-risk assets with no underlying income flow or productive value.”

The apex bank governor feels that if any form of digital payment is to be considered, it would be a wholesale CBDC. In her opinion, it would be easy to allocate a wholesale CBDC to commercial banks seeing that Danmarks Nationalbank already provides central bank reserves. Rather than the distributed ledger technology (DLT) which CBDCs ordinarily leverage, the technology for the wholesale CBDC would be modified.

Krogstrup pointed out that it goes way beyond technology for a retail CBDC. “Its introduction would change the structure of the financial system and the respective roles and demarcation lines between commercial banks, central banks, and other institutions in the provision of money,” she explained.

Countries Continue to Explore CBDC Use Cases

Currently, over 100 countries are exploring the potential use cases of CBDC, especially in integration with their existing traditional financial system.

It is noteworthy that for every one of these countries, there is a peculiar reason for wanting to implement a national digital currency. For some, it is financial inclusion; for others, it boosts their infrastructure and competition.

Fabio Panetta, an European Central Bank (ECB) executive board member, pointed out that the digital euro is necessary to keep up with the increasingly digitized economy. Bank of Japan plans to launch an advisory panel to explore a potential digital yen as it enters the pilot testing phase.