Norges Bank, Norway’s central bank, has confirmed the country’s plan to impose watertight regulations over the local digital currency ecosystem to mitigate systemic risks.
In a statement, the banking regulator said that the growing industry-related threats have made it imperative to strengthen contingency arrangements for payment systems. Norges Bank and the Financial Supervisory Authority of Norway are leading the drive by introducing a new testing framework to assess the cyber resilience of payment systems.
Norges Bank Deputy Governor Pal Longva remarked that the advent of innovative technology like blockchain and Web3 has heightened the risks facing payments globally. He highlighted the collapse of FTX and the contagion to the broader financial systems as proof of the threats posed by their increasing adoption.
“Maintaining a secure payment system requires the efforts of individual entities and effective public-private cooperation. Cyber incidents can quickly spread across sectors, and contingency work in the various sectors must therefore be viewed in a broader context,” said Longva.
At the moment, the financial infrastructure in Norway is considered as one of the most secure and efficient in the world, but regulators are keen on seizing the initiative to bolster the existing framework. The central bank is currently exploring a central bank digital currency (CBDC) as part of a collective effort to stay ahead of the curve.
“The Norwegian authorities should assess whether to proceed more quickly rather than wait for international regulatory solutions. Norges Bank can contribute to such assessments and to regulation that promotes responsible innovation,” Longva said.
While the European Union’s Markets in Crypto Assets (MiCA) legislation is inching toward full-scale operation across the region, the Norwegian central bank believes that specific digital currency regulations are necessary.
The central bank participated in Project Icebreaker, a cross-border CBDC study involving Israel and Sweden, as part of efforts to contribute to their uniform development.
Bracing For Global Rules
The borderless nature of digital currencies has stoked the drive for a global framework for digital assets to stifle incidences of regulatory arbitrage. The G7 and G20 nations have pledged to issue a framework for member countries to regulate the growing industry in the coming months.
Both coalitions are particularly interested in regulating digital assets service providers in the same manner as financial institutions, a strategy supported by the International Monetary Fund (IMF) and the Financial Action Task Force (FATF). There is also a growing push for retail and wholesale CBDCs to be developed with a uniform standard across the board.