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Contingency arrangements need to be strengthened so that the public can continue to pay securely and efficiently, says Norges Bank.
Norges Bank, Norway's central bank, has used a new report to commit to future-proofing its payment system.
“Risks have intensified and the threat landscape has expanded. Maintaining a secure payment system requires the efforts of individual entities and effective public-private cooperation,” said Pål Longva, deputy governor.
“Cyber incidents can quickly spread across sectors, and contingency work in the various sectors must therefore be viewed in a broader context.”
This means that it should be assessed whether, in addition to cash, contingency arrangements that are more independent of the ordinary payment system are needed.
Much like its Nordic neighbours, the country is very much veering away from cash.
However, Norges Bank suggests that it has remained stable in recent years.
Norges Bank’s latest survey shows that 3 percent of survey participants used cash in their most recent payments at physical points of sale.
Such arrangements would come in addition to the individual financial market infrastructure’s continuity and contingency plans. Norges Bank has said that it will engage in dialogue with other authorities and the industry on this issue.
As part of its strategy, Norges Bank and the country’s financial watchdog, Finanstilsynet, have also introduced a framework for testing the cyber resilience of the banking and payment systems.
Testing, which simulates real attacks, is now underway, Norges Bank has confirmed. The purpose is to strengthen the cyber resilience of financial sector entities and thus promote financial stability.
“We will face important choices when designing the payment system. Over the coming years, Norges Bank will study and decide on the future design of Norges Bank’s settlement system. At the same time, we are stepping up our work on a central bank digital currency,” said Longva.
Norges Bank is working intensely on its central bank digital currency (CBDC) project.
In the period to 2025, the central bank will analyse the possibilities afforded by a CBDC and its impact, and test and evaluate candidate solutions.
Crypto
The Norwegian authorities should assess whether to proceed more quickly rather than wait for international regulatory solutions on crypto-assets as well, the central bank said.
“Crypto-assets may gain increased importance for financial stability and ordinary payments,” the Norges Bank report says.
For this reason, regulation is necessary both to protect users and to address societal considerations, such as combating crime and promoting financial stability.
Although Norway will be in the regulatory scope of the Markets in Crypto-Assets (MiCA) regulation that has been developed by the EU, Norges Bank has advocated that “specific regulations should be developed further”.
Such specific regulations could be adapted to different risks associated with an activity, such as systemic risk, and contribute to more efficient allocation of responsibility for risks.
Specific regulation can also, Norges Bank says, facilitate more effective enforcement and increase the likelihood of infringement detection through follow-ups by dedicated supervisory authorities.
Here, Norges Bank has recommended a national strategy be put in place.
“The absence of such a strategy may provide more scope for private entities to influence Norwegian regulatory developments in an undesirable manner,” the central bank said.
It also believes that other regulatory conditions can influence the scope of crypto-asset activity in Norway.
Examples include regulations related to data centre operations, electricity taxes and other tax rules.
In its national strategy, the central bank has said that authorities should consider whether initiatives for further national regulations are needed, and the scope for national rules provided by the EU legislation.
“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,” said Longva.
Cards reign supreme in Norway
Norges Bank has also released its annual report on retail payments in the country, revealing the dominance of cards as the most preferred payment instrument.
According to the central bank, three quarters of all non-cash payments in the country were made using cards in 2022.
Norwegians are also among the highest global card users.
On average, each Norwegian used a card 531 times in 2022. To put this in context, in the US, this figure is around 450. The UK had around 370 card transactions per capita in 2021, according to VIXIO analysis.
Norway’s domestic card scheme, BankAxept, has come under increasing competitive pressure from international schemes in recent years, with the latter accounting for a 43 percent share of the Norwegian market in 2022, up from 37 percent in 2021.
