Bitcoin Cannot Replace Fiat Currency, Says Central Bank of World’s Most Cashless Country

Oystein Olsen, the governor of Norges Bank in Oslo, the central bank of Norway, recently explained why he does not believe that Bitcoin could one day replace money issued by central banks.

According to a report published by Bloomberg, he said during a phone interview that Bitcoin is “far too resource-intensive, far too costly and most importantly, it doesn’t preserve stability.” He then added:

“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 comments on Bitcoin come shortly after one of the country’s most prominent businessmen, Kjell Inge Rokke, endorsed the cryptocurrency and argued it will 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.“

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.“

Matt McDermott, global head of digital assets for Goldman Sachs Global Markets Division, has recently said there’s “huge” institutional demand for the flagship cryptocurrency across different industry types.

As Bitcoin’s adoption grows, Bloomberg points out central banks are racing to respond to widespread cashlessness by developing central bank digital currencies (CBDCs). The Deputy Governor of Norges Bank, Ida Wolden Bache, said back in November the country has become the world’s most cashless country, with 4% of payments being conducted with banknotes and coins.

Wolden has reportedly said that Norges Bank’s CBDC goal is to allow users to “be able to pay efficiently and securely in” the Norwegian kroner. The CBDC will “not change private sector credit intermediation.” Olsen, addressing bitcoin, 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.

Some analysts, on the other hand, believe Bitcoin could be a solution to upcoming problems in the market. Former hedge fund manager Jim Cramer said during a recent interview that the best way to prepare for the upcoming post-Covid “boom” is to buy Bitcoin.

Featured image via Pexels.

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