In the latest development, Norway is currently considering the potential adoption of a central bank digital currency (CBDC). In the process, Norway’s Central Bank, Norges Bank, has endorsed the Markets in Crypto-Assets (MiCA) regulation, which is a landmark framework created by the European Commission (EC) that focuses on maintaining financial stability.
The Markets in Crypto-Assets Regulation (MiCA) is the first comprehensive regulatory framework for the crypto industry and is set to go into full effect on Dec. 30. Under MiCA, stablecoin issuers will be required to hold at least 60% of reserve assets in European banks.
It also is designed to protect investors and promote widespread transformation in the crypto asset sector in European Union (EU) countries.
Norway Welcomes MiCA’s Framework
The project director for the Bank’s CBDC project in an interview with Cointelegraph stated that Norway, as a member of the European Economic Area (EEA), welcomes MiCA’s framework. However, the bank is still assessing “whether additional regulations are necessary to promote financial stability.”
He clarified that Norges Bank has not yet decided if it will issue a CBDC and is evaluating how to mitigate the regulatory gaps related to decentralized finance.
He underscored that as part of the EEA, Norway closely aligns with EU regulations, including MiCA, which is under public review and currently being assessed by the Ministry of Finance.
Digital Currencies To Exist In Parallel With CBDCs
Watne noted that Norges Bank considers CBDCs potentially useful for cross-border payments but it is uncertain as to how a CBDC-based cross-border payment system would look.
Notably, In 2023, the bank had participated in “Project Icebreaker,” a trial exploring new architectures for retail CBDC transactions across borders. Watne added:
“We believe that an eventual CBDC will, if issued, will supplement and not replace cash. We also believe that digital currencies will continue to exist in parallel with CBDCs.”
Privacy Concerns In CBDCs
According to Watne, Norges Bank has taken a calculated stance on privacy concerns related to CBDCs, realizing that digital payments “will leave digital taxes.”
He highlighted that Norges Bank “is not responsible for monitoring individual payment transactions” and that most central banks, including Norges Bank, do not plan to access customer CBDC payment details or account balances.
“Norges Bank’s analyses assume that this will be the path also for Norges Bank. As with other forms of payment, it will be necessary to ensure that relevant rules are complied with, for example, anti-money laundering rules.”
But What Are The Risks MiCA Poses To Banks?
Tether CEO Paolo Ardoino has noted that Europe’s forthcoming regulatory framework will introduce banking concerns for stablecoin issuers that could threaten the stability of the broader crypto space.
However, Ardoino added that stablecoin issuers under the new MiCA regime can protect themselves against a potential bankruptcy through securities.
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