In the early 1990s, the Bank of Finland embarked on an ambitious project to introduce a digital currency, the Avant card. This innovative initiative aimed to revolutionize the Finnish payment system by leveraging smart card technology. For its first three years, the Avant card was fully owned and operated by the central bank, positioning it as a true central bank digital currency (CBDC).
However, in 1995, the Avant card underwent a significant transformation. The central bank divested its ownership, leading to a consortium of commercial banks taking over the operation of the platform. This transition marked a key turning point in the Avant card’s journey, altering its status from a CBDC to a privately issued electronic money system.
While this shift may seem subtle to the average user, it holds substantial implications for the underlying structure of the system. As a privately held entity, the Avant card was no longer backed by the central bank’s full financial strength. Instead, its value became contingent on the commercial banks that formed the consortium.
This change raised questions about the Avant card’s resilience and reliability. While the central bank retained a supervisory role, the loss of direct ownership and backing could potentially pose greater risks to users. Moreover, the transition from a CBDC to a privately issued system blurred the lines between fiat currency and commercial bank money.
Despite these concerns, the Avant card continued to operate for several more years, maintaining its functionality and widespread acceptance among Finnish consumers. The pre-funded nature of the cards and the segregation of customer funds provided a layer of protection against loss. Additionally, the central bank’s ongoing oversight served as a reassuring element.
The Avant card experiment stands as a testament to the early exploration of digital currencies. While it may not have achieved widespread adoption or maintained its original CBDC status, it laid the groundwork for future developments in this domain. The lessons learned from the Avant card can inform current discussions and initiatives surrounding CBDCs.
