Norway Backs MiCA, Eyes CBDC to Enhance Financial Stability

Norway is taking steps toward a new era of digital finance. As Norges Bank explores the possibility of launching a central bank digital currency (CBDC), the bank has also supported the European Union’s Markets in Crypto-Assets Regulation—MiCA. 

This venture seeks to boost financial stability while addressing challenges in decentralized finance. Kjetil Watne, project director for Norges Bank's CBDC initiative, shared insights into how the country is approaching digital currency adoption.

Supporting MiCA and Evaluating CBDC

Being part of the European Economic Area (EEA), Norway aligns with EU regulations, including MiCA. This regulation is currently under review by the Ministry of Finance. Watne expressed that MiCA's framework would be a positive step for strengthening financial systems. 

However, he also mentioned that Norges Bank is considering whether additional regulations are needed to maintain financial stability in the face of emerging risks. Norges Bank sees CBDCs as a possible solution for improving cross-border payments. 

Watne pointed out, however, that the specifics of a CBDC-based payment system are still unclear. Last year, the bank participated in “Project Icebreaker,” which tested new ways to conduct retail CBDC transactions across borders. 

Privacy Concerns and Potential Risks

Norges Bank is taking a cautious approach when it comes to privacy and CBDCs. Watne emphasized that the bank does not plan to monitor individual transactions or access personal account details. 

Like many central banks, Norges Bank does not intend to track CBDC payments or balances. However, as MiCA becomes law on December 30, concerns about the impact on the banking sector are growing. 

Tether CEO Paolo Ardoino warned that MiCA's requirement for stablecoin issuers to keep 60% of reserves in European banks could create risks. For now, Norway faces the challenge of balancing innovation with ensuring stability in this new digital landscape.