Norges Bank supports the EU’s MiCA regulation while considering a CBDC to enhance cross-border payments and support Norway’s financial stability.
Norway’s central bank, Norges Bank, has endorsed the European Union’s Markets in Crypto Assets (MiCA) as the country evaluates the possibility of adopting a central bank digital currency (CBDC).
Kjetil Watne, project director of Norges Bank’s CBDC project, told Cointelegraph that Norway, as a member of the European Economic Area (EEA), welcomes MiCA’s framework. However, he noted that the bank is still considering “whether additional regulation is needed to promote financial stability.”
Watten explained that Norges Bank has “not yet decided” whether to issue a CBDC and is evaluating how to “mitigate regulatory gaps related to decentralized finance.”
Supporting MiCA and CBDC implementation
As part of the European Economic Area, Norway is closely aligned with EU regulations, including MiCA, which Votten said was “under public scrutiny and is currently being assessed by the Ministry of Finance”.
Watten said Norges Bank believes CBDC could be useful for cross-border payments, but "it remains to be seen what a cross-border payment system based on CBDC will look like."
In 2023, the bank participated in Project Icebreaker, a trial exploring new architectures for cross-border retail CBDC transactions. Watne added: “We believe that if a CBDC is eventually issued, it will complement rather than replace cash. We also believe that digital currencies will continue to coexist alongside CBDCs.”
Addressing privacy issues
Votten said Norges Bank has taken a cautious stance on privacy issues related to CBDCs, recognizing that digital payments “will escape digital taxes.”
He stressed that Norges Bank “is not responsible for monitoring individual payment transactions,” noting that most central banks, including Norges Bank, do not plan to access customers’ CBDC payment details or account balances.
“Norwegian Bank’s analysis suggests that this is also the path taken by Norwegian Bank. As with other payment methods, it is necessary to ensure compliance with relevant rules, such as those on anti-money laundering.”
Does MiCA create “systemic” banking risks?
Tether CEO Paolo Ardoino said the EU’s MiCA regulation will fully come into effect on December 12 and could pose “systemic risks” to the banking industry, especially for stablecoin reserves.
Under MiCA, stablecoin issuers would need to hold a significant portion of their reserves (at least 60%) with European banks, raising concerns about lending.
Ardoino explained that because banks have the ability to lend out up to 90% of their reserves, the risks posed by MiCA’s regulatory requirements could create a significant vulnerability in reserves if the bank holding those reserves fails.