Norway, the world's most cashless country, is testing a central bank digital currency after 4 years of research

• Norway's central bank on Thursday announced it will start testing a central bank digital currency.
• The world's most cashless country moves to further decrease cash transactions, which now stand at roughly 4%.
• The bank, after researching on CBDCs for four years, will now proceed with technical testing.

Norway's central bank on Thursday announced it will start testing various solutions for a central bank digital currency as the world's most cashless country moves to further decrease cash transactions, which now stand at roughly 4%.

"Norges Bank's research into CBDCs has run for a good four years. A new element moving ahead will be technical testing combined with further analysis of the need for and the implications of introducing a CBDC," the bank said in a statement, first reported by Anadolu Agency.

The central bank added that the tests will continue over the next two years.

"Additional knowledge is necessary for us to be able to decide whether issuing a CBDC is appropriate," Norges Bank Governor Øystein Olsen, said in a statement, first reported by Reuters.

Olsen, in the past, has seemed not as keen on developing CBDCs, saying these "raise complex issues," according to a June 2019 statement. At that time, the governor stressed that Norway has "little international experience to draw on," and added that more research is needed to ensure a secure and effective payment system.

To date, a number of central banks have been exploring CBDCs - with China leading the race - spurred by the cryptocurrency momentum that has rapidly risen as of late.

The Asian superpower began developing its digital currency electronic payment CBDC in 2014 and tested a pilot in 2020. According to a new Citi report this month entitled Future of Money, analysts said they expect China's "sprint to a cashless society" within five years.

The UK announced on April 19 that it is coordinating exploratory work on a potential CBDC, specifically "britcoin."

In April, the market capitalization of all cryptocurrencies hit $2 trillion, doubling in value in just three months.

CBDCs are digital currencies backed by their respective countries aimed at increase payment efficiency at a lower cost as compared to fiat currencies. Typically, these are be powered by blockchain technology, a secure system of recording that is almost impossible to hack.