As a seasoned crypto investor with roots traced back to the early days of Bitcoin, I find the recent endorsement of MiCA by Norges Bank and their potential adoption of a CBDC intriguing. Having witnessed the evolution of digital currencies from a distant observer, I’ve learned that every step forward in regulation brings us one step closer to mainstream acceptance.
Norway’s primary monetary authority, the Norges Bank, has given its approval to the European Union’s regulation for markets in crypto-assets, known as MiCA. As Norway considers the possibility of implementing a digital currency issued by its own central bank (CBDC), it is taking this regulatory framework into account.
Kjetil Watne, director of Norges Bank’s CBDC project, mentioned during an interview with CryptoMoon that Norway, being part of the European Economic Area (EEA), supports MiCA’s regulatory framework. Nevertheless, he pointed out that they are still assessing if extra regulations might be beneficial for maintaining financial stability.
Watne clarified that Norges Bank is still undecided about whether or not they will launch a Central Bank Digital Currency (CBDC), and they are currently examining ways to address any potential regulatory loopholes associated with Decentralized Finance (DeFi).
Supporting MiCA and CBDC implementation
In my role as an analyst, I can express that, being a member of the European Economic Area (EEA), Norway maintains a close alignment with the European Union’s regulations. This includes MiCA, a regulatory framework that is currently under public review and is being evaluated by the Ministry of Finance.
As a researcher delving into the realm of central bank digital currencies (CBDCs), I find Watne’s perspective intriguing. He suggests that Norges Bank views CBDCs as potentially beneficial for cross-border payments. However, the specific design and structure of a CBDC-based cross-border payment system is yet to be fully unveiled, a detail that remains uncertain at this stage.
In the year 2023, our bank took part in “Project Icebreaker,” an experiment aimed at testing innovative frameworks for cross-border retail central bank digital currency (CBDC) transactions. As stated by Watne:
“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.”
Addressing privacy concerns
As per Watne’s statements, Norges Bank has adopted a balanced approach towards privacy issues connected with Central Bank Digital Currencies (CBDCs), understanding that digital transactions could lead to the emergence of digital taxation.
He emphasized that Norges Bank “is not responsible for monitoring individual payment transactions” and noted 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.”
Does MiCA pose “systemic” banking risks?
According to Tether CEO Paolo Ardoino, the MiCA regulation of the European Union is scheduled to be fully implemented on December 30th, potentially posing “systemic risks” within the banking sector, especially concerning stablecoin reserves.
According to the MiCA regulations, stablecoin issuers must maintain at least 60% of their reserves in European banks, which raises some apprehension regarding potential loan implications.
As a researcher, I’ve discovered that banks can extend loans up to 90% of their reserves. This means that the regulatory requirements under MiCA might expose these reserves to potential risks, especially if the bank holding them were to face bankruptcy, creating significant points of vulnerability in reserve management.
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2024-11-09 12:38