Why Norges Bank says Bitcoin cannot replace fiat currency

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Oystein Olsen, the governor of Norway’s central bank, Norges Bank in Oslo, recently clarified why he does not think Bitcoin would one day overtake money provided by central banks.

According to a Bloomberg article, he claimed over the phone that Bitcoin is “much too resource-intensive, far too risky, and, most significantly, it does not maintain stability.” He went on to say:

I mean, the basic property and task for a central bank and central-bank currency is to provide stability in the value of money and in the system, and that is not done by Bitcoin.

The central bank governor’s remarks on Bitcoin came just days after one of the country’s most influential businessmen, Kjell Inge Rokke, backed the blockchain and argued that it would be on the “right side” of monetary history.

Interestingly, earlier this month, Norwegian industrial giant Aker ASA announced that it had “established Seetee AS (‘Seetee’), a new company dedicated to investing in projects and companies throughout the Bitcoin ecosystem.”

In its letter to shareholders, Norwegian billionaire businessman Kjell Inge Røkke, who is the Chairman of Aker said:

I want to state up­front that I am aware that Bit­coin is of­ten crit­i­cised for a num­ber of per­ceived challenges, includ­ing its elec­tric­i­ty con­sump­tion, its in­abil­i­ty to scale with respect to trans­ac­tions, and its po­ten­tial to facilitate anony­mous il­le­git­imate pay­ments. We be­lieve that Bit­coin can be a so­lu­tion rather than a prob­lem for each of those.

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He then explained why Aker had decided to get into the Bitcoin space:

Aker’s de­ci­sion to en­ter Bit­coin through See­tee is the re­sult of a long and fun­da­men­tal dis­cus­sion about value. I have been drink­ing from the firehose since last sum­mer. While this let­ter is my way of ex­press­ing my thoughts on the mat­ter, my in­sights are large­ly de­rived from read­ing ar­ticles and books, lis­ten­ing to pod­casts and watch­ing videos, as well as conver­sa­tions with peo­ple around me.

He then went on to say that Aker had decided that not investing in Bitcoin would be the riskiest decision:

Risk is not an ob­vi­ous con­cept. What’s com­mon­ly con­sid­ered risky is frequent­ly not. And vice ver­sa. We are used to think­ing that cash is risk free. But it’s not. It’s im­plic­it­ly taxed by in­fla­tion at a small rate every year. It adds up. Cen­tral bankers have mag­i­cal­ly agreed that they should tar­get two percent in­fla­tion, which im­plies that one third of your mon­ey’s worth is taxed away every twen­ty years. If it was three per­cent, al­most half of it would be gone in that time.

He later added:

We be­lieve bitcoin is go­ing to be on the right side of his­to­ry. But we should re­mind our­selves that some will re­sist force­ful­ly: Nor­way was the last coun­try in Eu­rope to adopt colour tv in 1972, sev­er­al years af­ter the tech­nol­o­gy was avail­able.

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Goldman Sachs Global Markets Division global head of digital assets Matt McDermott recently reported that there is “huge” institutional appetite for the flagship blockchain across numerous business categories.

Bloomberg notes that as Bitcoin acceptance increases, central banks are rushing to adapt to widespread cashlessness by creating central bank digital currencies (CBDCs). Ida Wolden Bache, Deputy Governor of Norges Bank, stated in November that the country had become the world’s most cashless country, with just 4% of purchases made using banknotes and coins.

According to Wolden, the aim of Norges Bank’s CBDC is for users to “be able to pay easily and safely in” Norwegian kroner. The CBDC will “make no improvements to private sector credit intermediation.” In addition to bitcoin, Olsen added:

I don’t think at the end of the day it will be a threat to central banks. Although some people talk about that.

Any experts, on the other hand, claim Bitcoin may be a workaround to the market’s upcoming problems. In a recent interview, former hedge fund manager Jim Cramer said that the only way to invest for the forthcoming post-Covid “boom” is to purchase Bitcoin.


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