Norway’s central bank is progressing its digital currency technical explorations, having made the source code for a Norwegian central bank digital currency (CBDC) sandbox publicly available and started working with two companies on developing ‘test cases’.
Norges Bank launched a programme of testing for a potential CBDC just under 18 months ago, saying that it planned to examine various technical solutions for a potential digital Norwegian krone over a two-year period.
The central bank subsequently engaged a Norway-headquartered blockchain company, Nahmii, to create a ‘sandbox environment’ to help its CBDC experimentation. Sandboxes are test spaces that allow innovative technologies to be trialled under close supervision.
Nahmii, which is located in the port city of Bergen, announced via a blog post on 8 September that ‘as part of [its] ongoing work with Norges Bank… the source code for their CBDC sandbox is now publicly available’.
Like most nations, Norway – which is not a member of the 27-strong European Union (EU) – has yet to commit to launching a CBDC. But Norges Bank, which has said that the share of cash payments in Norway is ‘probably’ the lowest of any country in the world, has been engaging various private companies to help it to explore the technical challenges and possibilities.
As well as Nahmii, the central bank has also recently started working with two Oslo-headquartered firms, Symfoni and Alpha Venturi, on ‘test cases’.
Open source: ‘good starting-point’
Many experiments and developments related to digital money are based on open-source technology, which nullifies the need to access proprietary technologies.
Global Government Fintech reported earlier this year, for example, that the Federal Reserve Bank of Boston and Massachusetts Institute of Technology’s (MIT) Digital Currency Initiative (DCI) had published initial findings of multi-stage research into CBDC tech as part of a partnership dubbed ‘Project Hamilton’, and that those running the project are looking to collaborate with ‘other technical contributors from a variety of backgrounds’ in an open-source repository, OpenCBDC (which is located on GitHub).
“There are still many remaining challenges in determining whether or how to adopt a central bank payment system for the US,” MIT DCI’s director, Neha Narula, said at the time. “What is clear is that open-source software provides an important way to collaborate, experiment and implement. In addition to supporting collaboration, monetary systems benefit from transparency and verifiability, which open-source offers.”
A post published on Norges Bank’s (Norwegian language) ‘Bankplassen Blog’ (‘Bank Square Blog’) on 12 May states that testing of software developed in Project Hamilton ‘will also be included as a workstream in Norges Bank’s experimental testing’.
Norges Bank’s testing using open-source software ‘is not a signal that the technology for a potential Norwegian variant of CBDC will be based on open source, but it is a good starting-point for learning as much as possible in collaboration with developers and alliance partners,’ according to the Bankplassen Blog.
Tapping into Norway’s developers
Norges Bank’s two-year experimentation period is the fourth phase of its CBDC journey, which began more than five years ago.
The central bank’s focus during the current timeframe is on testing technical solutions combined with analysis of the need for and consequences if a CBDC is introduced. The aim is to provide a basis for deciding whether Norges Bank should test a preferred technical solution.
“The technology we have chosen has an existing developer community in Norway, including in banks,” a Norges Bank spokesperson told Global Government Fintech. “By making the open-source code public on GitHub it can function as a technical sandbox developers can engage in either independently or in collaboration with Norges Bank.”
Nahmii announced in a blog post four months ago that the company had been selected to work with Norges Bank after a competitive tender process.
‘The sandbox project includes both technical and blockchain services, where Nahmii will build, maintain and train Norges Bank users and partners on the sandbox environment,’ the company stated. ‘In addition, the Norges Bank sandbox trial is expected to include all major Norwegian banks, who will also benefit from Nahmii’s technical expertise.’
Norges Bank has also started to work with Symfoni and Alpha Venturi since the Bankplassen Blog update was published in May.
Norges Bank’s CBDC sandbox: the technical inside track
* Nahmii’s work has focused on ‘defining and commissioning’ a sandbox production environment with open-sourced services, specifically Grafana, BlockScout and Hyperledger Besu (Grafana and Blockscout are tools that allow Norges Bank to monitor the network; Hyperledger Besu is a private Ethereum network being used by Norges Bank as core infrastructure for its prototype network)
* The sandbox ‘allows for the testing of basic token management use cases, including minting, burning and transferring ERC-20 tokens’ (ERC-20 is a token format/representation that Norges Bank is using to represent CBDC)
Source: Excerpts from Nahmii’s blog post (8 September 2022) with Global Government Fintech explanations
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Norway to test technical options for central bank digital currency – our news story (27 April 2021) on Norway’s plans to launch a programme of technical testing for a potential CBDC