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The Central Bank of Norway supports aligning with the European Union’s Markets in Crypto-Assets Regulation (MiCA) and is evaluating the use of a central bank digital currency (CBDC) to enhance financial stability. Kjetil Watne, a Norges Bank official, told Cointelegraph that Norway, as a member of the European Economic Area (EEA), welcomes MiCA’s framework. However, Watne noted that the bank is assessing whether additional regulations are needed to ensure financial stability.
Watne stated that Norges Bank has not yet decided on issuing a CBDC and is considering how to address regulatory gaps related to decentralized finance.
Supporting MiCA and the CBDC Implementation Process
As an EEA member, Norway works closely with EU regulations, including MiCA. Watne mentioned that MiCA is currently under public review and is being assessed by the Ministry of Finance.
Norges Bank believes that CBDCs could be beneficial for international payments but added, “What an international payment system based on CBDCs would look like remains uncertain.” In 2023, the bank participated in a pilot project called “Project Icebreaker,” which explored new architectures for cross-border retail CBDC transactions.
Privacy Concerns and CBDCs
Watne emphasized that privacy concerns regarding CBDCs are being addressed carefully. He noted that digital payments leave “digital traces” and clarified that Norges Bank is not responsible for monitoring individual payment transactions. He also pointed out that most central banks do not intend to access customer CBDC payment details or account balances.
Potential Impacts of MiCA on the Banking Sector
The MiCA regulation will be fully in effect by December 30, and according to Tether CEO Paolo Ardoino, it could create “systemic risks” in the banking sector, particularly concerning stablecoin reserves. Under MiCA, stablecoin issuers will be required to hold at least 60% of their reserves in European banks, raising concerns about lending activities.
Ardoino explained that since banks can lend out up to 90% of their reserves, the regulations introduced by MiCA could pose significant risks to reserves if banks face insolvency.
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