As Norway evaluates the prospect of a central bank digital currency (CBDC), Norges Bank has thrown its support behind the European Union’s Markets in Crypto-Assets (MiCA) regulation, citing alignment with the European Economic Area’s (EEA) regulatory stance. Kjetil Watne, project director of Norges Bank’s CBDC initiative, spoke about the potential role of MiCA and the central bank’s view on regulatory needs in an interview with Cointelegraph.
Norway’s CBDC Path: Still Under Consideration
Despite the endorsement, Watne emphasised that Norges Bank has yet to finalise any decision regarding the issuance of a CBDC. According to Watne, the bank is still evaluating regulatory challenges, particularly those posed by decentralised finance (DeFi). As part of the EEA, Norway maintains close regulatory alignment with the EU, making MiCA an important consideration as it undergoes review by Norway’s Ministry of Finance.
One area where Norges Bank sees promise in a potential CBDC is in enhancing cross-border payments. Watne noted that while this utility is recognized, “it remains to be seen how a CBDC-based cross-border payment system would look.” In line with this interest, the bank participated in Project Icebreaker in 2023, a cross-border trial exploring CBDC architecture for retail transactions.
Watne clarified that if issued, a CBDC would complement—not replace—cash, and digital currencies would coexist with CBDCs, allowing for a broader, parallel payment ecosystem.
Norges Bank acknowledges privacy issues as critical to CBDC adoption, with Watne pointing out that digital transactions naturally “leave digital traces.” He stressed, however, that Norges Bank does not intend to monitor individual transactions or customer balances, aligning with the privacy practices of other central banks. Anti-money laundering and other compliance rules would continue to apply without overstepping privacy bounds.
MiCA’s Impact on Banking Stability
The EU’s MiCA regulation, set for full implementation on December 30, brings new standards that may impact the banking sector, especially regarding stablecoin reserves. Tether CEO Paolo Ardoino raised concerns that MiCA’s requirements for stablecoin issuers to hold at least 60% of their reserves in European banks could introduce risk. Ardoino noted that if banks are authorised to loan out up to 90% of their reserves, a bank failure could jeopardise the stability of stablecoin reserves.
As Norway continues to assess its regulatory and operational stance on a CBDC, the bank’s support of MiCA underscores its commitment to harmonising with EU financial standards while addressing unique challenges posed by emerging digital finance.
