Norges Bank Supports EU's MiCA Amid CBDC Considerations

According to Cointelegraph, Norges Bank, the central bank of Norway, has expressed support for the European Union's Markets in Crypto-Assets Regulation (MiCA) as the nation deliberates on the potential introduction of a central bank digital currency (CBDC). Kjetil Watne, the project director for Norges Bank's CBDC initiative, highlighted Norway's alignment with MiCA's framework due to its membership in the European Economic Area (EEA). However, he mentioned that the bank is still evaluating whether additional regulations are necessary to ensure financial stability. Watne stated that Norges Bank has not yet reached a decision on issuing a CBDC and is currently examining ways to address regulatory gaps associated with decentralized finance. As part of the EEA, Norway adheres closely to EU regulations, including MiCA, which is under public review and being assessed by the Ministry of Finance. Watne noted that while CBDCs could be beneficial for cross-border payments, the exact structure of a CBDC-based cross-border payment system remains uncertain. In 2023, Norges Bank participated in 'Project Icebreaker,' a trial aimed at exploring new architectures for retail CBDC transactions across borders. Watne emphasized that if a CBDC is issued, it will supplement rather than replace cash, and digital currencies will coexist with CBDCs. Addressing privacy concerns, Watne explained that Norges Bank has adopted a cautious approach, acknowledging that digital payments will inherently leave digital traces. He clarified that Norges Bank is not responsible for monitoring individual payment transactions and that most central banks, including Norges Bank, do not intend to access customer CBDC payment details or account balances. The bank's analyses suggest that this approach will be maintained, ensuring compliance with relevant regulations, such as anti-money laundering rules. The EU's MiCA regulation, set to take full effect on December 30, has raised concerns about potential 'systemic risks' to the banking sector, particularly regarding stablecoin reserves. Tether CEO Paolo Ardoino pointed out that MiCA requires stablecoin issuers to hold a significant portion of their reserves, at least 60%, in European banks. This requirement could pose risks due to banks' ability to loan up to 90% of their reserves, potentially creating vulnerabilities if a bank holding these reserves faces bankruptcy.