Denmark will outsource its money printing work, and the central bank will turn to researching digital currency E-Krone

More and more central banks are beginning to question the point of printing money.

In Denmark, the monetary regulator (the Danish central bank) is studying the issuance of virtual currencies, believing that virtual currencies can reduce crime rates and provide greater transparency to regulators. Denmark is not alone in its digital currency issuance plan. The United Kingdom and Sweden have become the leaders of European digital currencies; while Singapore and Canada have completed online payment trials of blockchain currency systems.

Lars Rohde, the governor of the Danish central bank, is no longer focusing on regulating banknote printing in 2017, but on digital currency. He hopes that the digital currency issued by the central bank can reduce transaction costs. But the risks are considerable. Because for the central bank, this is an unknown area, and any surprise is enough to subvert a country's economy.

In 2017, Denmark's central bank will outsource its currency printing. Finland will be responsible for its coins, but no one has yet been chosen for the printing of banknotes. While cash will not disappear completely, Denmark has begun exploring cheaper and more efficient options. According to the Danish central bank, the cost of using banknotes is at least twice that of credit and debit cards.

Safety Net

Currently, the challenge in developing electronic currency does not lie in technological limitations.

Rohde said in an interview:

Our focus is no longer on issuing banknotes because we are well aware of the problems involved.

Cash currently accounts for only 20% of domestic transactions in Denmark, and not even a third of the money supply, so if online payment systems fail, cash is unlikely to be an alternative safety network.

Rohde said:

We have understood for many years that cash and paper money cannot be a substitute for electronic payments.

Blockchain

The Danish central bank believes that technologies such as blockchain may be the best operating model for virtual currencies.

Rohde said the central bank is considering whether to anonymize its electronic currency. They plan to add a corresponding number to each E-krone so that it can be traced. Blockchain, a ledger that records all electronic currency transactions, is the best choice to achieve this function. The concept of blockchain emerged because of Bitcoin, and the original purpose of this technology is to exempt the central bank from playing a role in it.

Lasse Birk Olesen, co-founder of blockchain startup Coinify, believes that whether a central bank will eventually adopt a blockchain system depends on the level of trust in the country's citizens and the monetary institution. In other words, the system must be suitable for a transparent and developed society.

In Denmark and other European countries, people have a high level of trust in their central banks. In Venezuela, the opposite is true.

He believes that in a blockchain system, small transactions benefit the most.

Small transactions and micro transactions have a great advantage. By then, electronic payments will become cheaper, faster, and more convenient.

Social transformation

Rohde said central banks still have many questions about the social impact of blockchain systems. For example, is it necessary for central banks to monitor transactions?

This type of surveillance can easily cause discomfort, especially in an age where consumers’ records are routinely monitored by large corporations for advertising and product sales, and consumer dissatisfaction with this practice has reached a fever pitch.

This is not the only reason why central banks are hesitant about issuing virtual currencies.

All the money of the Danish people will go to the central bank (after the issuance of the central bank's digital currency). However, in the current economic crisis, we cannot provide emergency assistance because we will become creditors of all banks.

Perhaps this problem can be solved eventually, but first we still need to face a lot of practical problems.