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1、2022FINANCIAL INFRASTRUCTUREREPORTSelected key figuresUnit cost per payment NOK 7.5Daily turnover in Norges Banks settlement system NOK 327.4bnNumber of banks 118Value of banknotes in circulation NOK 35bnDaily number of transactions in the Norwegian Interbank Clearing System(NICS)10.4mNumber of acco
2、unts in Euronext Securities Oslo 2mUnit cost per payment:Data from survey conducted in 2020.Source:Norges BankDaily turnover in Norges Banks settlement system:Average for 2021.Source:Norges BankNumber of banks:Number of banks with an account with Norges Bank.At year-end 2021.Source:Norges BankValue
3、of banknotes in circulation:Value of banknotes in circulation at year-end 2021.Source:Norges BankDaily number of transactions in the Norwegian Interbank Clearing System(NICS):Average for 2021.Source:BitsNumber of accounts in Euronext Securities Oslo:April 2021.Source:Euronext Securities OsloFinancia
4、l Infrastructure Report 2022 in a nutshellThe financial infrastructure is secure and efficientThe Norwegian payment system has long featured standardised and user-friendly solutions,and the operation of financial market infrastructures(FMIs)has been stable in recent years as well.Norges Bank conside
5、rs the financial infrastructure to be secure and efficient.Recently,a survey was conducted of the cost of payments.The payment systems resource use has decreased somewhat between 2013 and 2020 and appears to be low compared with other countries.An evolving payment landscapeThe payment landscape is e
6、volving,with internationalisation,new providers and new payment methods making their mark.Crypto-assets are currently rarely used for ordinary payments,while other applications are showing strong growth.Cyber threats are increasing.These structural changes are the reason for some of the Norges Banks
7、 planned and ongoing measures to ensure that the public can pay efficiently and securely in NOK also in the future.New framework to strengthen cyber resilience Norges Bank and Finanstilsynet(Financial Supervisory Authority of Norway)are working together to introduce cyber resilience testing of the f
8、inancial system in accordance with the TIBER-NO framework.It is expected that testing under this framework can begin in 2023.Norges Bank is assessing a new solution for settling real-time payments Norges Bank has entered into formal discussions with the European Central Bank(ECB)on possible particip
9、ation in the Eurosystems TARGET Instant Payment Settlement(TIPS)service.The primary objective is to facilitate the development of new real-time payment services for customers.Norges Bank is researching central bank digital currenciesFalling cash use and other developments in the payment system are t
10、he background for Norges Banks assessing whether to issue a central bank digital currency(CBDC).The Bank is currently performing experimental testing of technical solutions.At the same time,the Bank will continue to analyse the purpose and consequences of introducing a CBDC.Cash contingency arrangem
11、ents and the right to pay cash need to be clarified Cash has important attributes that promote a secure and efficient payment system.For cash to be easy to use,the right to pay cash should,in the Banks opinion,be clarified so that it cannot be contracted away by standard terms and conditions at poin
12、ts of sale.Cash is also important in a contingency situation.In the Banks view,appropriate cash contingency arrangements need to be clarified.Financial Infrastructure Report 2022Norges BankAddress:Bankplassen 2Post:P.O.Box 1179 Sentrum,N-0107 Oslo,NorwayPhone:+47 22 31 60 00E-mail:central.banknorges
13、-bank.noInternet:https:/www.norges-bank.noEditor:Ida Wolden BacheDesign:BrandlabLayout:07 Media ASThe text is set in 9.5 pt Azo SansISSN 1894-8634(online)Norges Banks Financial Infrastructure ReportIn its annual Financial Infrastructure Report,Norges Bank discusses developments,vulnerabilities and r
14、isks in the financial infrastructure.The Report is a part of Norges Banks work to promote financial stability and to contribute to an efficient and secure financial infrastructure.Efficiency means that payments can be made quickly,at low cost and adapted to users needs.Norges Banks other reports on
15、financial stabilityIn its annual Financial Stability Report,Norges Bank assesses vulnerabilities and risks in the financial system,with a focus on the long-term,structural features of banks,financial markets and the Norwegian economy that are of importance for financial stability.Norges Banks Moneta
16、ry Policy Report with financial stability assessment includes an ongoing assessment of financial imbalances and the banking sector,Norges Banks monetary policy assessments and the decision basis for the countercyclical capital buffer for banks.Norways financial system provides a comprehensive overvi
17、ew of Norways financial system,its tasks and the performance of these tasks and is updated approximately every other year.ContentsEXECUTIVE BOARDS ASSESSMENT 6NORGES BANKS RESPONSIBILITIES 91 CYBER RESILIENCE OF THE FINANCIAL INFRASTRUCTURE 122 CRYPTO-ASSETS 163 CENTRAL BANK MONEY 263.1 Cash 263.2 C
18、entral bank digital currencies 294 PAYMENT INFRASTRUCTURE 314.1 Further development of the real-time payment infrastructure 314.2 Introduction of ISO 20022 354.3 Cross-border payments 385 SECURITIES SETTLEMENT SYSTEMS 415.1 New authorisation for the central securities depository EuronextSecurities O
19、slo 415.2 Central counterparties and Brexit 426 THE SOCIAL COST OF PAYMENTS 45REFERENCES 50 ANNEX 54NORGES BANK FINANCIAL INFRASTRUCTURE REPORT 20226Executive Boards assessmentThe Financial Infrastructure Report is part of Norges Banks work to promote financial stability and an efficient and secure
20、payment system in Norway.The Executive Board discussed the content of the Report on 27 April 2021.Norges Bank supervises and oversees key financial market infrastructures(FMIs),issues cash and ensures settlement of interbank payments.At the same time,Norges Bank promotes change that could make the p
21、ayment system more secure and more efficient.An efficient payment system carries out payment transactions swiftly,at low cost and tailored to users needs.The Executive Board considers the Norwegian financial infrastructure to be secure and efficient.The Norwegian payment system has long featured sta
22、ndardised and user-friendly solutions,and the social costs of payments appear to be low compared with other countries.The operation of the financial infrastructure has been consistently stable.The payment landscape is evolving,with internationalisation,new providers and new payment methods making th
23、eir mark.At the same time,cyber threats are growing.These structural changes are the reason that Norges Bank is assessing whether meas-ures are needed to enable the public to pay efficiently and securely in NOK also in the future.Key issues are related to cyber resilience,the real-time payment infra
24、structure,central bank digital currency(CBDC)and cash.Threats to fundamental national interests and critical infrastructure are increasingly cyber-related.Over the past two years,there has been an acceleration of digital risk in Norway,with a marked rise in the number of serious incidents.Cyber atta
25、cks are used by various threat actors and may be a tool in wars and conflicts.Cyber incidents are a potential threat to the financial system and financial stability.Globally there is broad agreement that resilience against cyber attacks in the financial sector must be strengthened.This requires exte
26、nsive public-private cooperation,which has been a defining feature of the Norwegian payment system.Norges Bank and Finan-stilsynet(Financial Supervisory Authority of Norway)are working together to introduce cyber resilience testing in accordance with the TIBER framework in Norway(TIBER-NO)to bolster
27、 the cyber resilience of the financial system.Critical functions to be tested and the entities responsible for them have been identified.Testing is expected to begin in 2023.TIBER-NO testing includes the sharing of experience with testing and therefore also involves collaboration with private entiti
28、es.Awell-functioning real-time payment solution is a key component of an efficient payment system.Real-time payments are payments where the funds are available in the payees account seconds after the payment is initiated.Norges Bank has entered into formal discussions with the European Central Bank(
29、ECB)on possible participation in the Eurosys-tems TARGET Instant Payment Settlement(TIPS)service.The primary objective is to facilitate the development of new real-time payment services for customers.Norges Bank is in the process of reviewing and assessing the TIPS service at a detailed level,NORGES
30、 BANK FINANCIAL INFRASTRUCTURE REPORT 20227including the technical setup,security,contingency arrangements and costs.This work will lead to a basis for deciding on a possible participation in TIPS,which safeguards Norges Banks requirements and the needs of other relevant stakeholders.The internation
31、al messaging standard ISO 20222 will be the standard for payment mes-sages in Norway.ISO 20222 enables messages to contain more information and the information is structured in a way that better facilitates automated payment processing.Work to introduce ISO 20022 is ongoing at banks,Bits and Norges
32、Bank.In the Executive Boards view,it is important that payment infrastructure participants prioritise this work.Crypto-assets are currently rarely used for ordinary payments.Other applications are experiencing strong growth.An example is decentralised finance,with services such as loans,derivatives
33、and conversion between crypto-assets.The development of stable-coins,digital currencies intended to have a stable value against official currencies,plays an important role in decentralised finance and may help to give crypto-assets a greater role in ordinary domestic and cross-border payments.There
34、have been a number of initiatives to regulate crypto-assets internationally,includ-ing in the EU/EEA.Some of them address systemic risk,especially related to stablecoins.Geopolitical uncertainty and financial sanctions have highlighted the need for regulation in this area.Regulation can help realise
35、 economic gains from innovation and mitigate risk.Norges Bank is monitoring developments and will contribute to regulation that promotes responsible innovation.Falling cash use and other developments in the payment system are the background for Norges Banks assessing whether the public should have a
36、ccess to a CBDC in addition to cash.The Banks research into CBDCs has reached a phase comprising experimental testing of technical solutions,while the purposes and consequences of introducing a CBDC are analysed further.The research will provide a basis for a decision on whether the Bank will take t
37、he next step and test a candidate solution.Although cash usage is low in normal situations,cash still plays an important role in the payment system.Cash is ultimately the only alternative if electronic payment solutions should fail completely and is important for those that do not have the skills or
38、 opportu-nity to use digital payment solutions.For cash to be able to fulfil its functions,it must be available and easy to use.New amendments to the Financial Institutions Act clarify the banks obligation to enable their customers to make cash deposits and withdrawals.The amendments help to make ca
39、sh more available.Banks are responsible for cash contingency arrangements if the electronic payment systems fail.In the event of a larger-scale failure of societal infrastructure,Norges Bank is of the opinion that appropriate cash contingency arrangements need to be clarified,including the division
40、of responsibility for back-up solutions.In Norges Banks view,this should be studied further in collaboration with relevant institutions.Norges Bank has noted that some merchants do not accept cash payments.For cash to be easy to use,it is the Banks opinion that the right to pay cash should be clarif
41、ied so that it cannot be contracted away by standard terms and conditions.And at the same time,the ability to impose effective sanctions should be in place for failure to comply.In the 2022 Financial Market Report,the Norwegian government announced its intention to appoint a commission to assess the
42、 future role of cash in society before the end of this year.Norges Bank supports the creation of such a commission.NORGES BANK FINANCIAL INFRASTRUCTURE REPORT 20228Norges Bank has recently surveyed the Norwegian payment systems resource use.As a share of mainland GDP,this has decreased somewhat betw
43、een 2013 and 2020.More payments are being made than before,and the unit cost per payment has therefore fallen.Card payments at physical points of sale have become cheaper.Asignificant increase in online shopping,which features a higher unit cost per payment than shopping at physical points of sale,p
44、ulls up total costs.Most bills are currently paid using auto-mated solutions such as direct debit and e-invoicing.However,many bills are still sent on paper or as e-mail attachments.Manual processing means that paying such bills involves relatively high resource use.Transitioning to more automated s
45、olutions would save society considerable resources.At the same time,it is important that non-digital users have access to payment services that are tailored to their needs.NORGES BANK FINANCIAL INFRASTRUCTURE REPORT 20229Norges Banks responsibilitiesNorges Bank is tasked with promoting financial sta
46、bility and an efficient and secure payment system.1 The Banks tasks in this regard comprise:Overseeing the payment system and other financial infrastructure and contributing to contingency arrangements.Supervising interbank systems.Providing for a stable and efficient system for payment,clearing and
47、 settlement between entities with accounts with Norges Bank.Issuing banknotes and coins and ensuring their efficient functioning as a means of payment.As operator,Norges Bank ensures efficient and secure operating platforms and sets the terms for the services the Bank provides.As supervisory authori
48、ty,Norges Bank sets requirements for licensed interbank systems.Through its oversight work,Norges Bank urges participants to make changes that can make the financial infrastructure more efficient and secure.An efficient payment system carries out payment transactions swiftly,at low cost and tailored
49、 to users needs.The use of instruments in different areas will vary over time and be adapted to develop-ments in the payment system and the financial infrastructure.Norges Bank is tasked 1 Section 1-2 of the Central Bank Act and Section 2-1 of the Payment Systems Act.Financial infrastructureThe fina
50、ncial infrastructure can be defined as a network of systems,called financial market infrastructures(FMIs),that enable users to perform financial transactions.The infrastructure must ensure that cash payments and transactions in financial instruments are recorded,cleared and settled and that informat
51、ion on the size of holdings is stored.Virtually all financial transactions require the use of the financial infrastructure.Thus,the financial infrastructure plays a key role in ensuring financial stability.The costs to society of a disruption in the financial infrastructure may be considerably highe
52、r than the FMIs private costs.The financial infrastructure is therefore subject to regulation,supervision and oversight by the authorities.The financial infrastructure consists of the payment system,the securities settlement system,central counterparties(CCPs),central securities depositories(CSDs)an
53、d trade repositories.1 Cyber resilieNCe Of the fiNaNCial iNfrastruCture 12NORGES BANK FINANCIAL INFRASTRUCTURE REPORT 202210with giving advice to the Ministry of Finance when measures should be implemented by bodies other than the Bank in order to meet the objectives of the central bank.Norges Banks
54、 supervision and oversight workNorges Bank is the licensing and supervisory authority for the part of the payment system called interbank systems(Table 1.1).These are systems for clearing and settling transactions between credit institutions.If a licensed interbank system is not configured in accord
55、ance with the Payment Systems Act or the licence terms,Norges Bank will require that the interbank system owner rectify the situation.The purpose is to ensure that interbank systems are organised in a manner that promotes financial stability.Licensed interbank systems are shown in Table 1.1.Norges B
56、ank may grant exemptions from the licensing requirement for interbank systems considered to have no significant effect on financial stability.Oversight entails monitoring FMIs,following developments and acting as a driving force for improvements.This work enables Norges Bank to recommend changes tha
57、t can make the payment system and other FMIs more secure and efficient.Even though Norges Bank oversees the payment system as a whole,individual systems are subject to regular individual oversight(Table 1.1).Norges Bank assesses the FMIs that are subject to supervision and oversight in accord-ance w
58、ith principles drawn up by the Committee on Payments and Market Infrastructures(CPMI)and the International Organization of Securities Commissions(IOSCO).The CPMI is a committee comprising representatives of central banks,and IOSCO is the interna-tional organisation of securities market regulators.Th
59、e objective of the principles is to ensure a robust financial infrastructure that promotes financial stability.Anumber of the FMIs that Norges Bank supervises or oversees are also followed up by other government bodies.The oversight of international FMIs that are important for the financial sector i
60、n Norway takes place through participation in international collaborative arrangements.Finanstilsynet supervises systems for payment services.These are retail systems,which the public has access to,such as cash,card schemes and payment applications.Norges Banks oversight covers the payment system as
61、 a whole,including retail systems.Definitions in the Payment Systems ActPayment systems are interbank systems and systems for payment services:Interbank systems are systems for the transfer of funds between banks common rules for clearing and settlement.Systems for payment services are systems for t
62、he transfer of funds between customer accounts in banks or other undertakings authorised to provide payment services.Securities settlement systems are systems based on common rules for clearing,settlement or transfer of financial instruments.1 Cyber resilieNCe Of the fiNaNCial iNfrastruCture 12NORGE
63、S BANK FINANCIAL INFRASTRUCTURE REPORT 202211The EU Central Securities Depository Regulation(CSDR)imposes a number of tasks on Norges Bank which supplement Norges Banks responsibilities for overseeing Euronext Securities Oslo under the Central Bank Act.Finanstilsynet is the competent authority for E
64、uronext Securities Oslo under the CSDR,while Norges Bank is a relevant authority.Adetailed description of the FMIs supervised or overseen by Norges Bank is provided in Norways financial system 2021.2Table 1.1 FMIs subject to subject to supervision or oversight by Norges BankSystemInstrumentOperatrNo
65、rges Banks rolleAndre ansvarlige myndigheterInterbank systemsNorges Banks settlement system(NBO)CashNorges BankSupervision(Norges Banks Supervisory Council)and oversightSupervision:Norwegian National Security AuthorityNorwegian Interbank Clearing System(NICS)CashBitsLicensing and supervision DNBs se
66、ttlement bank systemCashDNB BankLicensing and supervisionLicensing and supervision of the bank as a whole:Finanstilsynet and Ministry of Finance SpareBank 1 SMNs settlement bank systemCashSpareBank 1 SMNOversightLicensing and supervision of the bank as a whole:Finanstilsynet and Ministry of FinanceC
67、LSCashCLS Bank InternationalOversight in collaboration with other authoritiesLicensing:Federal Reserve Board Supervision:Federal Reserve Bank of New York Oversight:Central banks whose currencies are traded at CLS(including Norges Bank)Securties settlement systemsEuronext Securi-ties Oslos central se
68、curities deposi-tory businessSecurities and cashEuronext Securities Oslo and Norges BankOversightLicensing and supervision of Euronext Securities Oslo:FinanstilsynetLCHs central counterparty system Financial in-strumentsLCHOversight in collaboration with other authoritiesSupervision:Bank of England
69、Oversight:EMIR College and Global College(including NorgesBank)EuroCCPs central counterparty systemFinancial in-strumentsEuroCCPOversight in collaboration with other authoritiesSupervision:Dutch central bank Oversight:EMIR College(including Norges Bank)2 See Norges Bank(2021a).NORGES BANK FINANCIAL
70、INFRASTRUCTURE REPORT 2022121 Cyber resilience of the financial infrastructureThreats to fundamental national interests and critical infrastructure are increas-ingly cyber-related.Over the past two years,cyber resilience risk has increased with the number of serious incidents showing a marked rise.C
71、yber incidents can affect financial stability if they affect one or more critical financial system functions or by affecting software,services or providers that many institutions rely on.In the Norwegian financial system,cyber incidents can spread quickly because of the high degree of operational in
72、terconnected-ness.At the same time,the financial sector in Norway has established risk mitigation measures and collaborates effectively through venues such as Nordic Financial CERT(NFCERT).Globally there is broad agreement that resilience to cyber attacks with the potential to threaten financial sta
73、bility should be strengthened.Norges Bank is engaged in mitigating cyber risk in the financial system and,along with Finan-stilsynet,is in the process of establishing testing of cyber resilience in Norway in accordance with the TIBER framework.Threat landscapeThreats to fundamental national interest
74、s are increasingly cyber-related.Potential sab-otage of critical infrastructure resulting from cyber attacks can have serious conse-quences.Substantial assets and obvious opportunities for financial gain make the finan-cial sector an attractive target.The number of serious cyber incidents has triple
75、d since 2019.3 Foreign intelligence ser-vices are behind many of them.4 According to the Norwegian Police Security Service,the cyber attacks on the Storting(Norwegian parliament)in 2020 and 2021 were exam-ples of very serious incidents.5 Other countries have found that state actors have the capacity
76、 to carry out sabotage with the aid of cyber attacks.6 Over time,there has been a trend whereby threat actors are becoming increasingly specialised and also buy services from one another.Both parties are using cyber attacks as weapons of war in Ukraine.For instance,Russian cyber attacks have disable
77、d satellite communication used by the Ukrainian army,elec-tricity supply and the governments website.The sharp increase in ransomware attacks in recent years illustrates the potential for harm by digital sabotage.7 The attacks on Nordic Choice and Amedia in 2021 are exam-ples of incidents in Norway.
78、In other countries,the health services,police,fuel deliveries and food supplies are among those that have been affected.3 See NSM(2022).4 See NSM(2022).5 See PST(2022).6 See PST(2022).7 See PST(2022).1 Cyber resilieNCe Of the fiNaNCial iNfrastruCtureNORGES BANK FINANCIAL INFRASTRUCTURE REPORT 202213
79、The ransomware attack on Colonial Pipeline in May 2021 resulted in a stoppage over several days of the companys fuel distribution to much of the US east coast and showed that cyber attacks on infrastructure can have serious consequences.8 In March 2022,the FBI sent out an alert that more than 50 bus
80、inesses in 10 critical infrastructure sectors had been affected by RagnarLocker ransomware.9 This shows that ransomware attacks on infrastructure are widespread in the US,which can be an indication of such develop-ments in Norway as well.The SolarWinds incident in 2021,where software was infected an
81、d widely distributed,illustrates the potential for cyber attacks though supply chains.This type of attack is likely to be common in the period ahead.Complex supply chainsNew entrants are taking positions in and delivering services to the payment system.Global giants and newly established companies a
82、re delivering payment services to end-users,for example,on smart phone apps.More and more key payment system functions and services are being provided by global companies.ICT operations are increasingly being delivered via cloud services from centralised data centres.The secu-rity level of many of t
83、hese large providers is high,but long supply chains increase com-plexity and dependencies.How can cyber attacks threaten financial stability?Characteristics of the financial system can potentially amplify and spread the conse-quences of a cyber attack through the system.In very serious cases,cyber a
84、ttacks have the potential to threaten financial stability(Chart 1.1).Owing to extensive digitalisation and interconnectedness,the financial system in Norway is vulnerable to cyber attacks.The chart shows how the impact of a cyber attack can be amplified through channels of contagion in the financial
85、 system.The consequences are normally limited to the busi-nesses and value chains directly affected by the attack.The attack will initially be felt on a technical level,eg by putting ICT systems out of operation,and can quicky there-after have business-related consequences.8 See NSM(2021).9 See FBI
86、Cyber Division(2022).Chart 1.1:Path from a cyber incident to a systemic crisisProbabilityCyber threatVulnerabilityAssetsCounter-measuresSystemvulnerabilitiesConsequencesBusinessimpactsTechnicalimpactsCircumstances in which acyber incident arisesImpact atstarting pointContributingfactors thatexacerba
87、te shockTransmit shockthrough thesystemContextShockAmplificationSystemic eventCyber riskSingle firmaffectedMultiple firmsaffectedSupply chainaffectedStarting pointOperationalConfidenceFinancialAmplifiersContagionchannelsCyber specifamplifiersSystemamplifiersImpact increasesSystemicevent Systemic mit
88、igantsExhaustion absorptive capacityImpact exceeds systemsability to absorb the shockSource:Ros,G.(2020)1 Cyber resilieNCe Of the fiNaNCial iNfrastruCtureNORGES BANK FINANCIAL INFRASTRUCTURE REPORT 202214The shock can be amplified through the financial system via dependencies and inter-connectedness
89、,aggravating its impact at both the operational and financial level and by weakening confidence in the system.Asystemic crisis ensues if the impact of the attack exceeds the systems ability to absorb the shock.Measures to mitigate cyber riskEach entitys capabilities in preventing and dealing with at
90、tacks are the most important part of defence against cyber incidents.Industry collaboration is also important.In the Nordic countries a collaborative effort in the financial sector coordinated by NFCERT10,has been established to share information about vulnerabilities and incidents.The Finan-cial In
91、frastructure Crisis Preparedness Committee(BFI)plays a key role in preventing and resolving crises and other situations that can result in serious shocks to the financial infrastructure.There is increasing risk that a cross-border cyber incident could have a systemic global impact.11 Internationally
92、 there is broad agreement that financial sector cyber resilience should be strengthened.The potentially serious consequences for financial stability of a cyber attack increase the need for regulation and coordination.Norges Bank is pursuing its efforts in this area by participating in Nordic and Eur
93、opean collaborative arrangements for sharing information and developing methodologies for mitigating cyber risk in the financial system.An important measure in Norway is the introduction of the TIBER framework,TIBER-NO.TIBER-NO is a national adaptation of TIBER-EU,developed by the European Central B
94、ank(ECB).12 TIBER tests simulate real attacks and provide greater insight into vulnerabilities for both the entity tested and for financial stability.Astandardised testing programme ensures quality and comparability of experience with testing,also across countries.Norges Bank and Finanstilsynet are
95、collaborating on TIBER-NO and are in the process of establishing a“TIBER-NO Cyber Team”(TCT-NO)to administer and operationalise TIBER-NO.TCT-NO is to be organised at Norges Bank and is expected to be established before year-end 2022.Critical functions have been identified.Plans are being established
96、 for a separate body for experience sharing after TIBER testing in Norway,the TIBER-NO Forum,with its first meeting in 2022 Q3.The collaboration with Finanstilsynet on TIBER-NO is an example of cooperation between key participants,which is an important characteristic of the Norwegian payment system.
97、This cooperation has helped give Norway a payment system whose operations are stable,which is particularly important in contingency situations.Once TIBER-NO testing is launched,there are plans to share experience with testing between entities responsible for the functions being tested.Asuccessful in
98、troduction of TIBER-NO therefore also involves collaborating with private entities.Norges Banks cyber resilience requirements for operators of FMIs have become more stringent(see Norges Bank(2021b).Operators are expected to conduct self-assessments of their level of maturity based on internationally
99、 recognised standards,and to take necessary action.10 Nordic Financial CERT(NFCERT)is a non-profit organisation in the Nordic financial sector.Its purpose includes sharing threat intelligence and information about vulnerabilities and assisting financial institutions will dealing with cyber attacks.S
100、ee NFCERT(2022).11 See ESRB(2021).12 In 2018,the ECB published a framework for testing an entitys ability to detect and respond to a cyber attack(Threat Intelli-gence-based Ethical Red Teaming(TIBER-EU)(see ECB(2018).The purpose of TIBER-EU is to enhance the cyber resilience of financial sector enti
101、ties and promote financial stability.1 Cyber resilieNCe Of the fiNaNCial iNfrastruCtureNORGES BANK FINANCIAL INFRASTRUCTURE REPORT 202215In 2020,the IMF performed an assessment of supervision and oversight of the cyber resilience of Norways financial sector as part of its review of the Norwegian fin
102、ancial system.In the IMFs assessment,the Norwegian financial systems platforms for sharing information and threat intelligence and for dealing with attacks are mature and advanced.Regulatory and supervisory practices are generally adequate.Norges Bank is following up the recommendations,which are re
103、lated among other things to the process for cyber resilience oversight,Norges Banks expectations of payment system operators,and reporting of systemically critical incidents.NORGES BANK FINANCIAL INFRASTRUCTURE REPORT 2022162 Crypto-assetsNew applications,risk and regulatory initiatives have drawn c
104、onsiderable atten-tion to crypto-assets and associated products and services.The role of crypto-assets as means of payment outside of the crypto-asset market is still modest.The development of stablecoins may result in a greater role for crypto-assets in ordinary payments.The emergence of crypto-ass
105、ets provides opportunities for innovation,but also carries risks to both individuals and society as a whole.Regulation can promote responsible innovation,which contributes to both realising societal gains and to mitigating risk.Anumber of international regu-latory initiatives have been taken,includi
106、ng by the EU/EEA.However,many regulatory questions and decisions remain.Developments in crypto-asset marketsValue fluctuations and the emergence of new products and services associated with crypto-assets have sustained interest in crypto-assets over the past year.The total value of crypto-assets has
107、 also been highly volatile over the past year.The Bitcoin(BTC)market share has remained around 40%,while Ethereum(ETH)has remained around 20%(Chart 2.1).Ethereum has been a key ecosystem for the development of a number of new products and services including decentralised finance,non-fungible tokens(
108、NFTs)and Web3 applications in general.New cryptocurrency systems have emerged that can compete with Ethereum,such as infrastructures for decentralised finance.Examples include Solana and Cardano.The value of these systems currencies has risen,although with considerable volatility.Chart 2.2 shows dev
109、elopments in the value of different crypto-assets over the past year as a percentage of the value at 1 May 2021.There is reason to believe that speculating on price movements in certain crypto-assets can largely explain the volatility.Asurvey conducted by Arcane Research and EY shows Chart 2.1 Marke
110、t capitalisation of cryptocurrencies and shares for the two largest.May-21USD trnPercentMay-22Jul-21Sep-21Nov-21Jan-22Mar-222.75100Market capitalisation of cryptoassets in USD trnBitcoin share,percentEthereum share,percent8060402002.502.252.001.751.501.25Source:T 2 CryptO-assetsNORGES BANK FINANCIAL
111、 INFRASTRUCTURE REPORT 202217that interest also increased among the general public in Norway.13 The survey shows that approximately 420000 Norwegians hold crypto-assets,which is a 3%increase on the year before.At the same time,developments suggest that investment behaviour is more diverse than merel
112、y speculating on cryptocurrency volatility.This applies to both institutional investors and the mass market.Highly correlated developments in the value of several crypto-assets may indicate that investors consider cryptocurrencies to be substitutable investments.Analyses also show a correlation betw
113、een crypto-asset prices and prices for other assets.14 This may indicate a more general trend where crypto-assets follow broad market fluctuations.This corre-lation can also increase the importance of crypto-assets for financial stability.15 The financial stability impact of crypto-assets is discuss
114、ed further in Norges Bank(2021b).13 See Arcane Research and EY(2022).14 See Adrian and Weeks-Brown(2021).15 See Adrian et al(2022).Glossary of termsCrypto-assets:Collective term for cryptocurrencies,stablecoins and tokens(see below).Often used in the regulatory contexts of assets that are represente
115、d with cryptographic codes in distributed ledgers.Cryptocurrencies:Units in a ledger or data system designed to be operated in a decen-tralised manner.Ledgers are often referred to as blockchains.The units are accessible via cryptographic keys.The system itself can be referred to as a DLT(distribute
116、d ledger technology)system,while the ledger units are cryptocurrencies.Smart contracts:Asmart contract is a computer programme that automates exchanges between entities according to pre-defined conditions.The term is often used to describe programmes in a DLT system.Tokens:Assets in a DLT system,oft
117、en issued under a smart contract.Accessible via cryptographic codes.Tokens can be fungible(mutually interchangeable)or non-fungible(Non-fungible token NFT).The latter represents a unique value,such as a digital piece of art,or items in a gaming ecosystem.Such NFTs can also represent other traditiona
118、l assets,such as securities and real estate.Decentralised finance:Financial products and services implemented using smart con-tracts.This may include decentralised exchange services,lending platforms or platforms for trading financial instruments.Stablecoins:Cryptocurrencies that aim to preserve a s
119、table value against a benchmark(for example USD)through a stabilisation mechanism.They are often implemented as tokens in a smart contract in a DLT system.They can be secured,for example,through external assets managed by an external entity,external crypto-assets and/or algorithms that impact supply
120、 and demand.Web3:Avision for a more decentralised internet where users own their own data and where blockchains make users less dependent on central operators.One type of Web3 application is Metaverse,which refers to virtual worlds(gaming etc)or a network of such worlds.2 CryptO-assetsNORGES BANK FI
121、NANCIAL INFRASTRUCTURE REPORT 202218Chart 2.2 Price developments for selected cryptocurrencies.Index,1 May 2021=100.Bitcoin(BTC)Ethereum(ETH)Cardano(ADA)Solana(SOL)Avalanche(AVAX)Terra(LUNA)5006007008004003002001000May-21Mar-22Jul-21Sep-21Nov-21Jan-22May-22Source:TThrough their holdings or acquisiti
122、ons,institutional market participants have invested in crypto-asset service providers.16 In September 2021,it became known that Mastercard had acquired the company Ciphertrace,which among other things,provides analytical services for uncovering criminal transactions in cryptocurrency systems.In Janu
123、ary 2022,it became known in Norway that the media company Schibsted had invested in the trading platform Firi.17 Globally,certain financial institutions have acquired or invested in crypto custody service providers.18 Companies that provide services and products related to decentralised finance,NFTs
124、,Web3 and the metaverse,have attracted venture capital.19New products and services have also attracted mass market users.Analyses show that NFTs are primarily traded in the mass market.20 Chart 2.3 shows developments in market value of crypto-assets that are used on decentralised finance platforms(o
125、ften referred to as“total value locked”TVL).The Arcane Research and EY survey discussed above shows that 10%of Norwegians who hold crypto-assets(ie approximately 1%of the Norwegian population)participate actively in decentralised finance and NFT-related activities.Stablecoins play an important role
126、in crypto-asset trades particularly in markets that do not offer direct trading with deposit money.Stablecoins also play a particularly important role as liquid assets and unit of account in Desentralised Finance.Stablecoins can be collateralised in different ways that can involve very differing deg
127、rees of stability(see box:Glossary of terms).Chart 2.4 illustrates the price of some stablecoins designed to some extent to be stable against USD.The chart shows that the stability of stablecoins can vary.The stablecoin USDC,which is considered to be relatively well-col-lateralised,has thus far been
128、 more stable than USDT,where the value of the assets intended to stabilise it is more uncertain.USDC has so far shown more stable price developments than BUSD,which is a secured stablecoin that is especially used in con-nection with services offered by the company Binance.DAI is a more decentralised
129、 stablecoin that is also securitised with cryptocurrencies with automatic liquidity mech-anisms.DAI has remained relatively stable,although developments indicate that such 16 See The Block(2021).17 See NTB Communication(2022).18 See The Block(2021).19 See The Block(2021).20 See Chainalysis(2021).2 C
130、ryptO-assetsNORGES BANK FINANCIAL INFRASTRUCTURE REPORT 202219Chart 2.3 Developments in market value of crypto-assets locked to decentralised finance(DeFi)01008060May-21USD bnMar-22Jul-21Sep-21Nov-21Jan-22May-22Source:Tsecuritisation may have a pronounced impact on stability.One stablecoi
131、n that has grown particularly during 2022 is UST,which is an algorithmic stablecoin built into the Terra cryptocurrency system.The stability hinges on the cryptocurrency unit LUNAin the system absorbing USTs volatility.21 As can be seen in the chart,UST has been less stable than the other stablecoin
132、s mentioned.The value of UST collapsed in the beginning of May 2022 and over the course of a few hours the price dropped down to USD 0.7,only to fall further.Many stablecoins have depreciated quickly and collapsed,particularly those that are stabilised solely by algorithms.Some stablecoins that have
133、 remained stable have yet to be exposed to a significant stress situation that could challenge their stability.The lower 21 In simplified terms,this means that the user can extract or delete UST with LUNA as if UST were worth USD 1.This means that if the price of UST is over USD 1,the user has an in
134、centive to extract UST by deleting LUNA as they can sell UST for more than USD 1.Conversely,if the price of UST is under USD 1,the user has an incentive to delete UST and issue LUNA as they then receive LUNA as if UST was worth USD 1.This should have a stabilising effect on UST by adjusting supply a
135、nd demand.Terra has in any case decided to supplement this stabilising mechanism by building up reserves in other crypto-assets.When UST col-lapsed in the beginning of May 2022,the price of both LUNA and UST fell,and LUNA was not able to absorb the volatility in UST.The issuers attempted to liquidat
136、e some of the Bitcoin reserves without any noticeable effect other than a fall in Bitcoin prices.Chart 2.4 Volatility and market value of selected stablecoins02550755USDT(Tether)USDC(Circle)BUSD(Binance)DAIUSTUSDT(Tether)USDC(Circle)BUSD(Binance)DAIUST0.9800.9851.0000.9500.9901.0051.0101.
137、015May-21Price of selected stablecoins in USDMarket value of some stablecoins in billion USDMay-22Jul-21Sep-21 Nov-21 Jan-22 Mar-22May-21May-22Jul-21Sep-21 Nov-21 Jan-22 Mar-22 Source:T 2 CryptO-assetsNORGES BANK FINANCIAL INFRASTRUCTURE REPORT 202220part of Chart 2.4 shows developments in market va
138、lue in USD for the same three sta-blecoins and thus the quantity of issued units since they are USD-denominated.The developments illustrate the rise in demand for stablecoins.Crypto-assets continue to play a modest role as a means of payment beyond the crypto ecosystem.One exception is El Salvador,w
139、hich recognised Bitcoin as legal tender in parallel with USD in September 2021.This means that commercial entities have an obli-gation to list prices and receive payment in Bitcoin.In this regard,El Salvador has devel-oped a national system for Bitcoin-denominated payments.The IMF has pointed out po
140、tential negative economic consequences of introducing Bitcoin as legal tender 22 Other countries have introduced specific legislation that will facilitate the use of crypto-assets for payments.The Central African Republic has introduced legislation similar to El Sal-vadors.Many stablecoins are inten
141、ded for use as means of payment in the traditional economy and are being increasingly used in certain segments,for example remittances.Both technical and regulatory barriers prevent the use of stablecoins in traditional payments.Since stablecoins are often implemented as tokens on open blockchains,c
142、apacity con-straints and fees in the blockchain limit the appeal of such stablecoins for retail payments.New scaling solutions can mitigate this problem in the future.23 The regulatory barriers are discussed in more detail below.Risks and regulationCrypto-assets and their underlying technology may r
143、esult in gains for the financial system and offer new uses.At the same time,the emergence of crypto-assets and related ser-vices may entail risk for both individuals involved and for society.Regulation can promote responsible innovation that contributes to both realising gains and to reducing risk.G
144、lobally,there is an extensive debate on the regulation of crypto-assets,in which the authorities,business sector interests and academia are taking part.For many types of regulation,international coordination and cooperation will be necessary to achieve desired effects.In other areas,national regulat
145、ions may be more appropriate for address-ing national priorities and needs.Norges Bank takes part in the development of inter-national regulations through participation in certain relevant collaborative bodies and helps assess the need for specific regulations in Norway.Norges Bank(2021b)has discuss
146、ed a range of regulatory initiatives in the area of cryp-to-assets.These initiatives have evolved further.The European Commissions proposed Markets in Crypto-Assets Regulation(MiCA24)has been debated by the Council and the Parliament and is therefore closer to implementation.25 This regulation is de
147、signed to promote innovation,while also addressing matters including consumer protection,market integrity and financial stability.Member states are given some time to implement EU regulations so that there will still be some time remaining before the regulation could enter into force.New regulatory
148、initiatives are emerging in parallel with those that already exist.26 For a number of years,financial regulators across the globe have warned against investing in crypto-assets.Such warnings are about to be supplemented by more concrete instru-ments.MiCAincludes information requirements for crypto-a
149、sset service providers and 22 See Adrian and Weeks-Brown(2021)and IMF(2022).23 These may be new cryptocurrency systems that are more scalable or so-called layer 2 solutions that can be placed on top of cryptocurrency systems in order to increase capacity.24 See European Parliament(2022a).25 For prog
150、ress,see European Parliament(2022a).26 See Ferreira and Sandner(2021)provide an overview of different regulatory initiatives in the EU.2 CryptO-assetsNORGES BANK FINANCIAL INFRASTRUCTURE REPORT 202221makes providers liable for misstatements.In many parts of the world,separate regulations for the pro
151、motion of crypto-asset services are currently being prepared to protect con-sumers from uninformed risk-taking and from being misled.27 Such regulations supple-ment general rules on information integrity.For the US,President Biden has signed a March 2022 executive order requiring a number of agencie
152、s to examine the need for crypto-asset regulation.28Over the past year,certain areas have attracted particular attention from a risk and regulatory perspective:the significance of crypto-assets for financial stability,energy use related to certain cryptocurrencies,regulation of and liability for par
153、ticipants in crypto-asset systems and the ability of crypto-assets to circumvent sanctions resulting from the war in Ukraine.For an assessment of the significance of crypto-assets for financial stability and relevant regulations in that regard,see Norges Bank(2021c).In this consultation response,dif
154、ferent channels of systemic risk were discussed:the cryp-to-asset exposures of financial institutions and financial investors,mass liquidation of assets backing stablecoins in the event of a loss of confidence,and disruptions(includ-ing operational or financial)to crypto-asset systems with major rol
155、es in the payment system.Energy consumptionOne issue that has attracted considerable attention is the energy consumption associ-ated with certain decentralised mechanisms for validating transactions,particularly so-called proof-of-work,which is used for Bitcoin(see box:Energy consumption asso-ciated
156、 with Bitcoin).In summer 2021,China introduced a ban on cryptocurrency validation.Since a high share of the validations of,inter alia,Bitcoin had until then been conducted in China,the ban had a temporarily pronounced impact on Bitcoin energy consumption(Chart 2.5).However,this consumption rebounded
157、 rather quickly owing to increased mining activ-ity in other countries.In November 2021,the Swedish Financial Supervisory Authority together with the envi-ronmental authorities proposed a ban on energy-intensive validation mechanisms for cryptocurrencies in the EU,as an instrument for compliance wit
158、h the Paris Agreement.29 The draft MiCAregulatory framework initially contained a comprehensive ban on cryp-tocurrencies with energy-intensive validation mechanisms.After consideration by the ECON Committee in the European Parliament in March 2022,the proposal was modified so that by 2025,the Europe
159、an Commission must develop rules for the inclusion of cryp-tocurrency validation in EU taxonomy for sustainable activities.30 Some countries have introduced national bans owing to domestic effects on the electricity market.31 In the literature different proposals are provided for how institutional i
160、nvestors can address the environmental impacts of their energy consumption,and for taxation principles in carbon compensation.32Basically,it is the markets role to allocate resources.This also applies to resources that are used to validate cryptocurrency transactions.However,various forms of market
161、failure can prevent markets from allocating resources so that they provide the greatest possible benefit to society.Cost-benefit analyses can shed more light on the regulation of validation methods.In such an analysis,consideration should be given to whether 27 See for example HMTreasury(2022).28 Se
162、e the White House(2022).29 See Finansinspektionen(2021).30 See European Parliament(2022b).31 An example is Kosovo(see Reuters(2022).32 For example,see FSBC(2021).NORGES BANK FINANCIAL INFRASTRUCTURE REPORT 202222 2 CryptO-assetsENERGY CONSUMPTION ASSOCIATED WITH BITCOINCryptocurrencies have a decent
163、ralised design.This means that system participants compete to validate new transactions and propose blockchain updates.The reward is new Bitcoin and/or transaction fees in Bitcoin.This activity is often referred to as“mining”.Miners only receive rewards if their proposed updates are chosen by future
164、 users as a basis,so that they become part of the ledger.The reward system gives miners the incentive to only add valid transactions and are therefore essential for the systems self-regulation.The mechanism ensures that users agree on a single common ledger,even if there is no single entity responsi
165、ble for ledger maintenance.To prevent users updates from overcrowding the network,they can be linked to a scarce resource.In the Bitcoin network,this is energy.Proof must be provided of a certain amount of energy expended to solve cryptographic codes with raw computing power(“proof-of-work”)in order
166、 to validate.Other cryptocurrencies operate with mechanisms that are less energy-intensive.One example is the so-called proof-of-stake mechanism,whereby a user offers some of their own cryptocurrency units as collateral to propose transaction validations so that new units are added to the ledger.For
167、 Bitcoin,the verification mechanism entails the use of large amounts of energy by computers to solve cryptographic problems with raw computing power in order to val-idate.Aconsequence is that the higher the value,the higher the profitability of energy and equipment use in competing.Different energy
168、sources generate different projections for electricity consumption and associated emission volumes.Studies from the Univer-sity of Cambridge show that Bitcoin mining today may account for as much as 0.5%of the worlds electricity consumption.In addition,this activity leads to enormous amounts of elec
169、tronic waste.1Chart 2.5 shows projections for monthly Bitcoin energy use globally compared with in Norway.Energy consumption appears to correlate with Bitcoin prices,reflecting the fact that higher prices increase the gains of participating in validation.Chart 2.5 Electricity consumption in Norway a
170、nd Bitcoin validation2017TWhUSD200201214010 00020 00030 00040 00050 00060 000Electricity consumption NorwayElectricity consumption Bitcoin miningBitcoin(BTC)price in USDSources:Statnett,Cambridge Centre for Alternative Finance and Norges Bank calculations1 See de Vries and Stol
171、l(2021).2 CryptO-assetsNORGES BANK FINANCIAL INFRASTRUCTURE REPORT 202223any gains from cryptocurrencies can be achieved with less energy-intensive methods.In general,it can be demanding to compare the societal benefits of different purposes of electricity consumption.Regulation and liability for pa
172、rticipation in distributed ledger systemsThere is an ongoing debate about how cryptocurrencies can be regulated methodically.The debate gives particular focus to regulatory challenges tied to the decentralised design of the systems.33 The main approach to crypto-asset regulation so far has been the
173、regulation of different participants which serve as gatekeepers for access to cryp-to-assets,such as trading venues,custodians and payment service providers offering crypto-asset related services.Financial regulatory principles often serve as the inspira-tion for such crypto-asset regulation.Some ha
174、ve criticised this approach,citing the crypto-asset and ancillary service applications that are unsuited to financial regulatory principles.34Centralised elements related to the issuance of crypto-assets are also suitable for reg-ulation.For example,the pre-sale of a cryptocurrency under development
175、 can be subject to the same rules that apply to the issuance of securities.The MiCAregulatory framework discussed above regulates issuers of crypto-assets,including stablecoins.One challenge is formulating rules and regulations that make participants accountable and gives them incentive to take soci
176、etal considerations into account in the operation of crypto-asset systems.Certain international regulatory initiatives have been more directly aimed at participants of such systems.Different bans on certain validation mechanisms,for example owing to environmental considerations,regulate participants
177、 directly.In the US,a new infrastructure bill has been proposed that includes imposing tax-reporting requirements for cryptocurrency brokers.35Self-regulation of distributed ledger systems and the competition between the systems are not sufficient for addressing societal considerations.The primary o
178、bjective of self-reg-ulation is to make the systems secure and attractive and does not necessarily provide participants with incentives for designing the systems so that they address societal considerations such as environmental considerations,crime prevention and financial stability36.At the same t
179、ime,the decentralised design presents challenges related to the regulation of participants that provide services in the systems,such that they promote societal considerations.Systems are implemented as open source code,with a multitude of developers spread across the globe,performing fragmented task
180、s.Services,such as the validation of transactions,are performed in a decentralised manner by“nodes”that are spread out across the globe and designed so that no single node can impact the outcome alone.However,a decentralised design is no guarantee of actual decentralisation.More or less hidden power
181、 structures can have a substantial impact on the system.37 If this is the case,it would be natural for influential participants to be held liable for their behaviour.33 For a discussion of cryptocurrency regulation,see stbye(2021).34 See eg Chiu(2021).35 See Bloomberg(2021).36 See stbye(2021).37 See
182、 Walsh(2021).2 CryptO-assetsNORGES BANK FINANCIAL INFRASTRUCTURE REPORT 202224LEGAL LIABILITY OF DECENTRALISED SYSTEMS AND PARTICIPATION INTHEMOne method of holding desentralised systems and participation in them legally liable is to open up new forms of organisation that can be held legally liable.
183、Some participants emphasise that certain systems can be characterised as so-called decentralised auton-omous organisations(DAO),which from a regulatory perspective,can be assigned a legal person status on par with firms and other legal entities.With such systems given legal person status,they can al
184、so be assigned liability.If the systems are to be held liable in this manner,clarification will be necessary of how the organisation(the legal person)will be represented externally(eg in legal and regulatory contexts),and of capital provi-sioning to cover financial obligations.Certain jurisdictions
185、are experimenting with such organisational structures.Industry interests have proposed rules that would make it possible for such organisations,in line with firms,to benefit from limited liability while also wholly or partially relieving members of liability.1 Such rules could promote innova-tion bu
186、t also allow for greater risk taking and thus create challenges for responsible innovation.Another approach is individualising liability by drawing on established liability principles for participants in composite systems that fully or partly work for a common organisa-tion.2 This can be referred to
187、 as distributed,or network,liability and entails participants that are either fully(jointly and severally)or proportionally(pro rata)liable for their contributions to the system/network.The individuals liability can be impacted by con-tributions to/influence over the system and system-related risks
188、and rewards etc.Modern network analyses can help provide information on such influence.This approach to liability may be simpler to implement than creating new forms of organisation.This type of liability will not require substantial legal reform and can be based on established legal principles.The
189、introduction of this approach to liability for cryptocurrency system par-ticipants is still in the research and discussion phase.1 See Coala(2021).2 See stbye(2022).If a system is actually decentralised,there are still opportunities to hold the systems and participation in them legally liable(see bo
190、x:Legal liability of decentralised systems and participation inthem).38Norges Bank is assessing how liability of decentralised systems for crypto-assets and participation in them can reduce risk in Norges Banks areas of responsibility,including financial stability.Use of crypto-assets to circumvent
191、international sanctionsCryptocurrencies have also received considerable attention in connection with the war in Ukraine.When the war started,the value of crypto-assets fell considerably,in line with many other assets,but later rebounded.The ECB was among the first to point out the need for regulatio
192、n to counteract the use of crypto-assets to circumvent sanctions aimed at Russian entities.The US and other countries have since echoed the same need.Financial regulators in the US,the UK and the EU,among others,have emphasised that 38 See Chiu(2021).2 CryptO-assetsNORGES BANK FINANCIAL INFRASTRUCTU
193、RE REPORT 202225sanctions must be followed up by market venues and other crypto-asset market partic-ipants.The use of crypto-assets to circumvent sanctions raises a number of questions.Cryp-to-assets can be used as an alternative store of value or an alternative payment system for both persons that
194、are directly sanctioned and those who are not,but who do not have access to traditional payment systems because of sanctions.The ability of cryp-to-assets to circumvent sanctions depends on regulations in both the countries that impose sanctions and the sanctioned countries.In countries that impose
195、sanctions,it is possible to regulate users and third parties by also excluding certain users and banning sales of“blacklisted”cryptocurrency units.39 For sanctioned countries,crypto-assets can contribute to capital flight and reduced governance and control.For such countries,facilitating the use of
196、crypto-assets to circumvent sanctions is therefore not necessarily attractive.Developing alternative payment systems based on traditional technology to compete with SWIFT and international card companies may appear more attractive for maintaining governance and control.Central bank digital currencie
197、s(CBDCs)can also be an alternative.There are a number of interfaces between the war in Ukraine and crypto-assets.Both Ukrainian authorities and volunteer organisations have permitted the use of crypto-as-sets to support both military and civilian operations.This includes direct crypto-asset donation
198、s but also the use of crypto-asset systems for inter alia the issuance of NFTs to fund military and civilian activity.Norges Bank is monitoring how the war in Ukraine is impacting the use of crypto-assets and the degree to which these developments affect risks and the need for regulation.39 In crypt
199、ocurrencies,it is possible to track transactions through registry addresses,and certain addresses can be sanctioned.This may be more difficult for cryptocurrencies with enhanced anonymity characteristics,and this may explain a certain price and turnover growth of such cryptocurrencies.The use of suc
200、h cryptocurrencies can also be counteracted by regulation.NORGES BANK FINANCIAL INFRASTRUCTURE REPORT 2022263 Central bank moneyAt present,most payments are made using bank deposits,ie money created by banks.Norges Bank issues central bank money in the form of cash.Norges Bank is considering whether
201、 to supplement the cash used by the general public with a central bank digital currency(CBDC)to ensure an efficient and secure payment system and confidence in the monetary system.3.1 CashThe share of cash payments fell to a historically low level during the Covid-19 pandemic,increasing resource use
202、 per cash payment.Cash has a number of important charac-teristics that help to ensure that the payment system is efficient and secure.For example,cash helps prevent financial exclusion and is the only means of payment if the electronic payment solutions should fail completely.These characteristics a
203、re still vital,even if cash usage in normal situations is low.Recent amendments to the Financial Institutions Regulation will help to safeguard the availability of cash now and in the future.Norges Bank is of the opinion that it should be clarified what is considered appropriate cash contingency arr
204、angements,including the division of responsibility,in situations with a more widespread failure of critical infrastructure,also beyond the electronic payment systems.There is also a need for clarification of the payment situations in which the buyer may demand to pay cash.In the Financial Market Rep
205、ort 2022,the Government announced plans to establish a commission in the course of the year to assess the future role of cash.Norges Bank supports the establishment of such a commission.Cash usage has declined over a long period and fell further during the pandemic.Norges Banks surveys of private in
206、dividuals show that around 4%of respondents used cash to make their most recent payment(Chart 3.1).However,information from other sources suggests that cash usage may be higher(see Section 6).Cash usage may also vary by Chart 3.1 Cash usage as a percentage of payment typesNumber of payments12%11%15%
207、10%9%12%12%11%19%9%9%9%9%9%8%7%7%8%3%3%3%4%4%3%3%3%6%3%3%4%4%4%5%0%5%10%15%20%25%TotalAt the point of salePayment between private individualsSpring 2017Autumn 2017Spring 2018Autumn 2018Spring 2019Autumn 2019Spring 2020Autumn 2020Spring 2021Autumn 2021Spring 2022Source:Norges Bank 3 CeNtral baNK mONe
208、yNORGES BANK FINANCIAL INFRASTRUCTURE REPORT 202227merchant type and population segment.For example,in the grocery trade,cash usage may be higher than the data in the chart suggest.Costs and benefitsBecause cash usage has fallen substantially and a large proportion of the costs are fixed,the social
209、costs per cash payment have risen(see Section 6 for details).At the same time,cash has characteristics that help to ensure a secure and efficient payment system.Many of these characteristics are of such a nature that they will continue to be important even in the face of falling cash usage.Cash cont
210、ributes to preventing financial exclusion in that it gives those who lack the skills to use electronic payment methods or are without access to them the opportunity to pay.Surveys of payment patterns show that cash is used more by the elderly and by immigrants,for example.Electronic contingency arra
211、ngements are the first line of defence if electronic payment methods fail.Nevertheless,cash still plays an important contingency role if the electronic payment methods fail(see box:Stronger contingency arrangements for POS terminals).The Norwegian Directorate for Civil Protection(DSB)recommends that
212、 Norwegian households hold some cash as a contingency reserve.After major events,it has been noted that cash withdrawals increase.After the pandemic-related lockdown of Norway in March 2020,cash withdrawals from Norges Bank rose,and households average cash holdings increased before falling back some
213、what(see Norges Bank(2020).The amount of cash in circulation increased slightly also after Russias invasion of Ukraine.Furthermore,cash is without credit risk,and users ability to convert between bank deposits and cash underpins confidence in bank deposits.In addition,cash is legal tender.If the par
214、ties to a transaction do not agree on which means of payment to use,legal tender status ensures a reliable alternative.Cash is also an alternative that gives users a choice and promotes competition.For cash to fulfil its role in the payment system,it must be available and easy to use.Cash services a
215、vailabilityUnder Section 16-4 of the Financial Institutions Act and Section 16-7 of the Financial Institutions Regulation,banks have an obligation to ensure customers access to cash both in normal situations and if the electronic payment systems fail.In recent years,a number of ATMs,cash deposit mac
216、hines and bank branches have been closed.However,the general publics overall access to cash services has been strengthened,as a result of the Vipps in-store cash service(see broader discussion in Norges Bank(2021b).At 16 March 2022,the service encompasses 90 banks and more than 1400 retail outlets a
217、cross Norway.There are still shortcomings and vulnerabilities associated with the provision of cash services.Norges Bank has previously pointed out shortcomings and vulnerabil-ities regarding the ability of business customers to make cash deposits and that cash services are increasingly being channe
218、lled through the Vipps in-store cash services,which depends on functioning POS terminals and other electronic systems.Contingency arrangements for POS terminals have recently been strengthened(see box:Stronger contingency arrangements for POS terminals).The strengthened contin-gency arrangements for
219、 POS terminals do not include cash withdrawals.3 CeNtral baNK mONeyNORGES BANK FINANCIAL INFRASTRUCTURE REPORT 202228Stronger contingency arrangements for POS terminalsBits has worked to strengthen POS terminals contingency arrangements.Since Decem-ber 2021,several grocery chains,pharmacies and petr
220、ol stations have an improved backup solution,which will now function for seven days rather than only a few hours as previ-ously.The backup solution will function when underlying systems or communication with these systems are not working but requires a functioning POS terminal.The improved backup so
221、lution will give retail chains and terminal providers more time to rectify problems before households will need to pay cash,which would put pressure on the cash infrastructure.Even so,there might be increased pressure on other parts of the cash infrastructure,since it will not be possible to withdra
222、w cash via POS terminals when the backup solution is in use.It is important that cash is also available in case the electronic contingency arrangements fail.In such situations cash will be needed by both those who are always dependent on cash and those who are usually able to use electronic means of
223、 payment.It is also important to find efficient ways to ensure the availability of cash services so that costs are reasonable relative to the benefits.As a part of this,it is essential to clarify the scope of the banks responsibilities.In September 2021,the Ministry of Finance circulated amendments
224、to the Financial Institutions Regulation for comment.The amendments were approved by the Ministry of Finance on 5 April 2022 and enter into force on 1 October 2022.The amendments make clear that“each bank shall enable its customers to deposit and withdraw cash,either under the auspices of the bank i
225、tself or through an agreement with other cash service providers”.40Norges Bank supported the regulatory changes.41 At the same time,in Norges Banks opinion,further clarification of banks obligation to ensure satisfactory cash services for their customers is needed.This clarification should pertain t
226、o both functionality and geographical availability and consider the different needs of private individuals and businesses.Furthermore,it is the Banks view that sanctions for noncompliance must be clearly defined.Banks may take into account the risk-mitigating effects of electronic contingency solu-t
227、ions in designing their cash contingency arrangements(cf Section 16-7 of the Financial Institutions Regulation).It has not been specified how banks are to do this.In Norges Banks opinion,there should be established objective and verifiable criteria for how banks can consider the risk-mitigating effe
228、cts of electronic contingency solutions in designing their cash contingency arrangements.Banks are responsible for cash contingency arrangements if the electronic payment systems fail.In the event of a larger-scale failure of societal infrastructure,appropriate cash contingency arrangements need to
229、be clarified,and the division of responsibilities for backup solutions.Key questions are:When is it acceptable and reasonable for banks not to give their customers access to their money and how can customers need to pay 40 Regulation to amend the Financial Institutions Regulation(in Norwegian only).
230、https:/www.regjeringen.no/no/dokumenter/forskrift-om-endring-av-finansforetaksforskriften/id2907346/41 See Norges Bank(2021c).3 CeNtral baNK mONeyNORGES BANK FINANCIAL INFRASTRUCTURE REPORT 202229for goods be secured?This work requires collaboration among relevant government bodies,the banking indus
231、try and other entities,if necessary.Norges Bank will follow up these questions further.Cash services ease of useFor cash to be a real payment alternative,the public must have the ability to pay cash.Norges Bank has noted that some merchants do not accept cash payments.Norges Bank is of the opinion t
232、hat consumers right to pay cash should be clarified to prevent individual businesses from unilaterally stipulating in their standard terms and conditions that the right to pay cash does not apply when they offer goods and services to the public.In addition,it should be clarified which payment situat
233、ions are not covered(such as eg online shopping)at the same time,that the possibility to impose effective sanctions should be in place for failure to comply.In the proposition for a new Financial Contracts Act in 2020,the Ministry of Justice and Public Security,stated that there is a need to look at
234、 whether the current rules on the right to pay in legal tender are appropriate.The Ministry of Justice and Public Security is in the process of looking more closely at how the right to pay cash can be strength-ened,including what clarifications should be made in the legislation(see Financial Market
235、Report 2022).In the Financial Market Report for 2021,Finanstilsynet proposed that a public commission assess the future role of cash,and how the needs of various customer groups for cash services can be accommodated in the most efficient way possible.In its deliberations on the Report,the Storting m
236、ade a formal request of the Government to appoint a public commission to assess the future role of cash.The Government announced in the Finan-cial Market Report for 2022 that it intends to appoint such a commission in the course of 2022.Norges Bank supports the establishment of such a commission.3.2
237、 Central bank digital currenciesNorges Banks research into central bank digital currencies(CBDCs)is in its fourth phase,which consists of experimental testing of technical solutions and an analysis of purposes and consequences of introducing a CBDC.This work will provide a basis for deciding whether
238、 Norges Bank will test a candidate solution.ACBDC is a digital form of central bank money denominated in the official unit of account for general purpose users,ie a digital version of cash.So far,only a few central banks have introduced or are in the process of introducing a CBDC.Many central banks
239、are now devoting considerable resources to exploring a potential CBDC.In 2021,the Eurosys-tem announced the launch of an investigation phase of the digital euro project.In the UK,a taskforce chaired jointly by the Bank of England and the Treasury has been estab-lished to study the issue.Central bank
240、s in the US,Canada,Sweden,China and elsewhere have intensified their efforts on CBDCs,as have international organisations such as the IMF and the Bank for International Settlements(BIS).The BIS Innovation Hub has been established to experiment with ways in which new technology can strengthen the fin
241、an-cial system,with CBDCs as a main focus.CBDCs can take several forms with different characteristics,depending on its purpose.The purpose of and need for a CBDC depend on a countrys economic and financial structure.For example,assessments of financial inclusion as a purpose of a CBDC will depend on
242、 the extent to which the population already has access to payment services.3 CeNtral baNK mONeyNORGES BANK FINANCIAL INFRASTRUCTURE REPORT 202230Norges Banks researchFor Norges Bank,the paramount question is whether introducing a CBDC is an appro-priate measure for promoting an efficient and secure
243、payment system and confidence in the monetary system.The purpose of and previous work in researching CBDCs are discussed in detail in Norges Bank(2021b)and Norges Bank(2021e).In 2021,Norges Bank decided to continue its research into CBDCs.In this phase,exper-imental testing will be conducted of tech
244、nical solutions for a CBDC until summer 2023.The objectives and consequences of introducing a CBDC will also be analysed further,including the implications for monetary policy and liquidity management.This work will provide a basis for deciding whether Norges Bank will test a preferred solution.The
245、purpose of technical testing is to shed additional light on how solutions can deliver the necessary characteristics of a CBDC,and to uncover potential unintended conse-quences.Testing can also reveal economic and regulatory issues that are not captured by previous analytical work.The underlying tech
246、nology for a CBDC is yet to be decided.Norges Bank will draw on external providers in this work.The Bank has signed an agree-ment with a Norwegian company to program a simple prototype for issuance and destruc-tion of CBDC tokens(see Section 2 for an explanation of terms).The Bank is also con-ductin
247、g tests in“sandboxes”for CBDC solutions from different providers.Furthermore,Norges Bank is in discussions with several Norwegian banks and payment service pro-viders to test how a CBDC can be a means of payment in existing payment services.In this work,Norges Bank will seek to draw on experience fr
248、om CBDC testing and other work conducted by other central banks and international organisations.International cooperation can also provide the basis for standardisation and system interoperability.In the G20 initiative for enhancing cross-border payments,one of the topics is interop-erability betwee
249、n CBDCs for cross-border payments(see discussion in Section 4.3).If the public in one country has access to a CBDC in another,financial and economic conditions could be affected in both countries,particularly if there is uncertainty about the financial position of the banking sector in the first cou
250、ntry.It is therefore important to include potential cross-border effects when assessing a CBDC in Norway and the possible impact in Norway if CBDCs are introduced in other advanced economies.NORGES BANK FINANCIAL INFRASTRUCTURE REPORT 2022314 Payment infrastructureThe payment infrastructure is the f
251、oundation of the payment system.Its func-tion is to facilitate safe and efficient payments and payment settlement.Future-orientated changes to the infrastructure must be considered with a view to maintaining its safe and efficient functioning.Projects to assess a future real-time payment infrastruct
252、ure and the introduction of the ISO 20022 mes-saging standard in the Norwegian payment infrastructure are underway.Work is also in progress internationally to improve cross-border payment systems.4.1 Further development of the real-time payment infrastructureNorges Bank has explored an expansion of
253、its role as settlement bank to include the settlement of real-time payments.The primary objective is to facilitate the develop-ment of new real-time payment services for customers.The Banks assessment so far is that participation in the Eurosystems TIPS solution will promote the best develop-ment of
254、 Norwegian real-time payments in the years ahead.Real-time payments are payments where the funds are made available on the payees account seconds after payment is initiated 24 hours a day and all year round.Today,bank customers can initiate such payments via online banking or the Vipps mobile paymen
255、t solution.In 2021,186m real-time payments were made in Norway(Chart 4.1).Norwegian banks have so far pursued a growth strategy and a high level of investment for Vipps.As a retail payment service,Vipps utilises several underlying layers of infra-structure in order to execute a real-time payment(Cha
256、rt 4.2).The banks established an improved solution for real-time payments in the underlying infrastructure in 2020 through their common NICS interbank system(called NICS Real).42 The system provides for the receipt,exchange and clearing of interbank transactions.The net positions between banks when
257、real-time payments are executed are settled at fixed times in Norges Banks settlement system(see box:The real-time payment process).42 Bits,which is the Norwegian banking and finance industrys infrastructure company,is the system owner for NICS and is licenced by Norges Bank.NICS Real is built on a
258、technical solution that is owned,operated and further developed by Mastercard.Chart 4.1 Number of transactions in 2021 by payment typeIn millions0500025003000OtherDirect debit agreements(retail customers)Real-time paymentsOnline banking(retail customers)Giros(debit and credit transfers),o
259、f which:Card paymentsSource:Norges Bank 4 paymeNt iNfrastruCtureNORGES BANK FINANCIAL INFRASTRUCTURE REPORT 202232Chart 4.2 Simplified illustration of the layers in the real-time payment infrastructurePAYERPAYEERetail payment solutionsBanks proprietary systemsNorges Banks settlement systemNICS RealN
260、eed for further developmentMost real-time payments in Norway are peer-to-peer(P2P)payments.Real-time payments can also offer social benefits in other types of payment situations and should therefore be developed in pace with the increasing demands and needs of different customer groups.In Norges Ban
261、ks view,banks and other market participants should develop and offer new real-time payment services for businesses and the public sector.The use of real-time payments may become widespread in shops and for other payments that are THE REAL-TIME PAYMENT PROCESSIn a real-time payment,the funds are avai
262、lable in the payees account seconds after payment is initiated.As bank customers make real-time payments,NICS Real calculates how much a bank owes or is owed by another bank.Anet position between banks is settled in central bank money at Norges Bank five times a day every weekday(Chart 4.3).The cred
263、it risk that arises between banks because the settlement in central bank money takes place after the payment is made is virtually eliminated as each bank has set aside liquidity in a designated account at Norges Bank.This ensures that the banks can cover their payment obligations as soon as customer
264、s make real-time payments.Chart 4.3 Real-time payment process in NorwayIMMEDIATE SETTLEMENTBETWEEN CUSTOMERS PAYERPAYEECONTINUOUS CLEARINGBETWEEN BANKS PAYERS BANKPAYEES BANKINTERBANK SETTLEMENTFIVE TIMES DAILYPAYERS BANKPAYEES BANK 4 paymeNt iNfrastruCtureNORGES BANK FINANCIAL INFRASTRUCTURE REPORT
265、 202233currently made using payment cards.Most payments today are made using payment cards(Chart 4.1).Expanded role for Norges Bank?Banks have different needs,priorities and strategies related to ICT projects ahead and differing views as to the urgency of establishing new real-time services.43 In ad
266、dition,payment services have become a competitive arena,among banks as well as between banks and other operators.This may weaken the incentive to develop a common under-lying infrastructure.In Norges Banks view,the extent to which banks by changing,adapting and develop-ing their own systems and solu
267、tions will make use of the possibilities provided by NICS Real is uncertain.Norges Bank is therefore considering expanding its role in real-time payments.This would mean establishing a new system for real-time payment settlement operated by Norges Bank that would partially or fully replace the funct
268、ions performed by NICS Real today.The system could also be designed for immediate settlement of real-time payments in central bank money 24 hours a day.The Banks assessment so far is that participation in the Eurosystems TARGET Instant Payment Settlement(TIPS)solution will contribute to ensuring the
269、 best development of Norwegian real-time payments.Participation in TIPS means that interbank settlement of NOK real-time payments takes place in the TIPS system on behalf of Norges Bank.44Participation in TIPS and the associated collaboration with other European central banks will ensure that the in
270、frastructure for settlement of Norwegian real-time payments is developed in alignment with developments in the rest of Europe(see also boxes:Sweden and Denmark to use the ECBs settlement systems and Further development of TIPS).NICS Real and TIPS are both technically and functionally safe,efficient
271、and modern underlying infrastructures for retail payment solutions.Both systems can provide payment exchange using the international messaging standard ISO 20022(for more details,see Section 4.2).This provides a good basis for the development of new and efficient retail services and use of future gl
272、obal innovations in real-time payments.However,in Norges 43 See Norges Bank(2021f).44 The terms of participation for Norwegian banks will be determined by Norges Bank within the framework set by the ECB for using the system.Sweden and Denmark to use the ECBs settlement systemsSveriges Riksbank concl
273、uded an agreement with the ECB in April 2020 on settlement of real-time payments in SEK using TIPS.The Riksbank has also announced that it aims to join the ECBs other settlement systems TARGET2 and TARGET2-Securities later.In December 2020,Danmarks Nationalbank announced its decision to move all DKK
274、 set-tlements to the ECBs systems in 2024/2025.This will include joining TIPS.TIPS became operational in 2018 and has so far been in limited use.However,when Denmark and Sweden join the system,use of the system is expected to increase con-siderably.In addition,the ECB intends TIPS to be the core of
275、the payment system for real-time payments and has announced measures to increase the use of the system.4 paymeNt iNfrastruCtureNORGES BANK FINANCIAL INFRASTRUCTURE REPORT 202234Further development of TIPSThe ECB has arranged for participating central banks to report national needs for the developmen
276、t of new functionalities and other adaptations.The implementation of system changes will be decided in collaboration between participating central banks and the ECB.The question of whether TIPS could support cross-border multi-currency real-time payments is being explored(see also Section 4.3 on cro
277、ss-border payments).If the ECB decides to enable a cross-currency capability in TIPS and Norges Bank decides to join TIPS,the service will also be available for real-time payments between NOK and the other participating currencies.Banks can then develop retail services for such payments.Banks view,b
278、y participating in TIPS rather than banks continuing to develop NICS Real Norges Bank will be in a better position to influence developments.As system owner,Norges Bank will be able to take a coordinating and unifying role in getting banks to use the existing and future functionalities offered by TI
279、PS.At the same time,developing retail real-time payment services will remain the domain of banks and other operators.For example,establishing real-time payment solutions for the corporate market may require adaptations and further development by businesses and their finan-cial system providers.It is
280、 nonetheless Norges Banks view that the use of common standards and the predictability provided by participation in TIPS may stimulate banks and other operators to provide real-time retail payment services.Norges Bank also considers that participation in TIPS and the establishment of efficient,forwa
281、rd-looking real-time retail payment services may reduce the risk of international operators establishing payment solutions based on alternative means of payment or dominating the market to such an extent as to impair Norwegian authorities manage-ment and control of important components of the paymen
282、t system.Formal dialogue with the ECBNorges Bank launched a public consultation in 2021 to elicit the views of the Norwegian banking industry and other stakeholders on the development of an infrastructure for real-time payments and a potential participation in TIPS.45 The banks and banking groups th
283、at submitted a response to the consultation agree that Norges Bank should enter into a dialogue with the ECB about joining TIPS.Joining TIPS will require banks to make appropriate arrangements and set aside resources.The dialogue with the ECB was formally initiated in January 2022.Norges Bank has be
284、gun to review and assess the TIPS solution at a detailed level,including the technical setup,security,contingency arrangements and costs.Work is also in progress on an overall plan for implementing the system.Norges Bank has established a reference group for dialogue with banks and other relevant st
285、akeholders through the process aimed at providing the basis for a decision on participation in TIPS and a currency participation agreement with the ECB that meets Norges Banks requirements and other relevant stakeholders needs.If Norges Bank decides not to join TIPS,the alternative is for banks to c
286、ontinue devel-oping NICS Real,while developing their own system solutions in line with the possibili-ties offered by NICS Real.Measures must be taken to ensure that developments are in 45 See Norges Bank(2021f).4 paymeNt iNfrastruCtureNORGES BANK FINANCIAL INFRASTRUCTURE REPORT 202235line with socie
287、tys needs and that the necessary national governance and control func-tions in an appropriate manner also in the future.Norges Banks view is that in this case,banks must achieve wider agreement than in recent years on the further development of the infrastructure.4.2 Introduction of ISO 20022The int
288、ernational messaging standard ISO 20022 is set to be the payment messaging standard in Norway.With ISO 20022,messages can contain more information and the information is structured in a way that facilitates more automated treatment of pay-ments.Banks,Bits and Norges Bank are preparing to introduce I
289、SO 20022.SWIFT was established in 1973 as a collaboration between large banks to increase the efficiency of cross-border payments(see box:SWIFT)by,for example,defining stand-ardised payment messages.The SWIFT FIN format was subsequently gradually adopted in national payment infrastructures in many o
290、ther countries.When todays Norges Banks settlement system(NBO)was introduced in 2009,Norges Bank decided to switch to SWIFT formats for all payment messages and all other com-munication between system participants and NBO.FIN format messages can carry a limited quantity of information.In addition,th
291、e pre-defined fields are often used differ-ently from system to system and much of the information is entered in free text fields.This restricts the possibilities for more automated processing of payments by banks and their customers.ISO 20022 is an international messaging standard for financial mes
292、sages developed by the International Organization for Standardization(ISO).There are several advantages to switching to the ISO 20022 format for payment messaging.ISO 20022-based messages can contain more information and are more structured than the FIN messages,which provides for more automation an
293、d more efficient payment processing.Standardisation reduces the complexity and will make it simpler for banks and other financial infrastruc-SWIFTSWIFT is an international network for financial messaging and a set of standardised messages for different types of transactions.SWIFT is used in over 200
294、 countries and more than 11 000 financial institutions and carries an average of about 46m messages every day(of these,about 20m are payment messages).SWIFT is a key provider for global and national financial market infrastructures and is a central element in interna-tional trade and cross-border pa
295、yments.Being excluded from SWIFT can be very dam-aging,see also box:Exclusion of Russian banks from SWIFT.For domestic transactions in Norway,SWIFT is used when banks send payments for settlement in Norges Banks settlement system(NBO).SWIFT is also used in the com-munication on settlements between E
296、uronext Securities Oslo and NICS and NBO.SWIFT has a similar role in other countries.The SWIFT head office is in Belgium and is subject to EU legislation.As a critical service provider for banks and interbank systems,SWIFT has been overseen by the G-10 central banks since 1998.The National Bank of B
297、elgium acts as lead overseer.4 paymeNt iNfrastruCtureNORGES BANK FINANCIAL INFRASTRUCTURE REPORT 202236ture participants to use messages across different infrastructures.In addition,increased standardisation across national borders will make it easier for banks to meet regulatory requirements(money
298、laundering regulations,etc).There is broad national and international consensus for the proposal to base messaging formats in the payment infrastructure on the ISO 20022 standard,and in 2018 the SWIFT board of directors decided to fully migrate several todays FIN messages to ISO 20022 for cross-bord
299、er payments.Projects have been launched by the industry in Norway and Norges Bank to migrate the relevant FIN messages to ISO 20022.Introducing a new messaging format is an extensive process,involving risks,costs and a need for coordination between different operators.The board of Bankenes Standard-
300、iseringskontor(the banks standardisation office,now Bits)took a policy decision in 2014 to make ISO 20022 the standard for all payment messages in Norway.Part of the back-ground for the decision was the EU requirement that all euro retail payments,including REDUCING PROVIDER DEPENDENCE IN NICSOperat
301、ion and development of the financial infrastructure have largely been outsourced.ICT providers are therefore crucial for the delivery of critical functions in the payment system and other financial market infrastructures.In Norges Banks assessment,depend-ence on these providers should be reduced so
302、that switching to a different service pro-vider when necessary can be efficient and robust.1The Norwegian Interbank Clearing System(NICS)is one of the most important interbank systems in Norway.Almost all payment transactions in NOK are cleared in NICS before being sent for settlement in Norges Bank
303、s settlement system.Bits AS(Bits),the Nor-wegian banking and financial industrys infrastructure company,is the system operator for NICS and is licensed by Norges Bank under the Payment Systems Act.The service provider situation for NICS has changed considerably in recent years.In 2021,Mastercard acq
304、uired parts of Nets,which has been responsible for the technical opera-tion of NICS for many years.Some operational services are still performed for NICS from the part of Nets not included in the acquisition,but Mastercard is planning to take over these services too in the next few years.As licensin
305、g and supervisory authority for NICS,Norges Bank set a requirement in 2020 that NICS should be made more independent of service providers.2 This is one reason Bits launched a large-scale project to modernise NICS.The project is expected to be in progress for the next few years.An important element o
306、f this work is phasing out Norwegian solutions and formats for the exchange of transactions.These solutions restrict the range of alternative providers.The ISO 20022 format will be used in the transaction exchanges between the banks and NICS.Message types and message flow in NICS will be based on gu
307、idelines which are compiled on a Nordic level by the Nordic Payments Council(NPC).This will provide the basis for real competition among providers and reduce provider dependence.Another important measure is that Bits will facilitate the use of the commercially owned network BitsNet for messages betw
308、een the banks and NICS.1 See Norges Bank(2020).2 See Norges Bank(2021b).4 paymeNt iNfrastruCtureNORGES BANK FINANCIAL INFRASTRUCTURE REPORT 202237EXCLUSION OF RUSSIAN BANKS FROM SWIFTIn reaction to Russias invasion of Ukraine,the EU decided on 2 March this year to exclude some Russian banks from the
309、 SWIFT network.The banks were already subject to sanc-tions by the EU.Excluding Russian banks from the SWIFT system had previously been discussed after Russias annexation of Crimea in 2014.The Russian central bank then began to develop its own system with similar functionality as an alternative to S
310、WIFT.The system is called System for Transfer of Financial Messages(SPFS).Russia has thus taken action that from a strategic and technical perspective has reduced its dependence on SWIFT.Atotal of 400 Russian banks use the SPFS.Use of the system is limited internationally,but some 2030 banks in othe
311、r countries are connected to the network.The Russian financial infrastructure is thereby less dependent on SWIFT than for example the Norwegian financial infrastructure.The SPFS is nonetheless not a perfect alternative to SWIFT because of its limited functionality and shorter opening times.Sanctions
312、 against Russia,including exclusion from SWIFT,have restricted Russian banks trading with banks in Western countries.Alarge share of global trading involves a coun-terparty from the EU or the US,and exclusion from SWIFT may make banks in Western countries more reluctant to trade with other Russian b
313、anks in addition to the sanctioned Russian banks.Several of the same sanctions imposed on Russia today were imposed on Iran in 2012 and 2018.in non-euro EEAcountries,would have to submitted in the ISO 20022 format by 31 October 2016.The part of Norwegian banks common interbank system(NICS)that proce
314、sses real-time payments has been prepared for migration to ISO 20022.Bits started a project to mod-ernise NICS in 2021.The project includes preparing for all transactions,not only real-time transactions,to be exchanged using the ISO 20022 messaging format(see box:Reduc-ing provider dependence in NIC
315、S).In 2020 Norges Bank launched a pilot project,working in dialogue with the banking industry,to assess and draw up proposals on how the new messaging format could be used in NBO.The specifications for the new ISO 20022 messages for NBO were published on 1 March 2022.The relevant participants in NBO
316、 have been informed about the migration strategy and overall schedule for the transition to ISO 20022 in NBO.Use of the new messages is scheduled to start by November 2025.ISO 20022 messaging in NBO will be introduced for gross payment transactions,settle-ment of NICS clearings,securities settlement
317、 and foreign exchange(FX)settlement.For transactions between NBO and the relevant participants to be exchanged in the ISO 20022 format,participants that exchange SWIFT messages with NBO must also adjust their systems accordingly.4 paymeNt iNfrastruCtureNORGES BANK FINANCIAL INFRASTRUCTURE REPORT 202
318、238Standardisation through the ISO 20022 messaging format is an important element in improving an already efficient infrastructure.In Norges Banks view,it is important that participants in the payment infrastructure prioritise the work to make the transition to ISO 20022.4.3 Cross-border paymentsAcr
319、oss-border payment is a funds transfer where the payer and payee are resident in different countries.These payments are more complicated,more expensive and are executed more slowly than domestic payments for several reasons,and a number of initiatives have been launched internationally to increase t
320、he efficiency of these payments.Different areas of use for cross-border paymentsCross-border payments are used for different purposes and in different contexts and account for a relatively small share of the total number of payments executed through the payment system.If payments related to FX tradi
321、ng are disregarded,payments to and from other countries make up around 2%of the total number of Norwegian pay-ments.Nevertheless,these are important payment services for the users,and it should be possible to execute these payments efficiently and safely.Asubstantial portion of cross-border payments
322、 are related to payment for the import and export of goods and services.Such payments are executed through an international network of correspondent banks.This may for example mean that a Norwegian bank has an agreement with a US bank to execute payment from a Norwegian to a US cus-tomer.The Norwegi
323、an bank manages the Norwegian part of the payment,including sending the payment transaction to the US bank and debiting the amount in NOK from the payers account.The US bank forwards the payment information to the US payee and credits the payees account with the agreed amount in USD.The corresponden
324、t bank agreement describes the terms of the currency exchange and how the US banks outlay for the payment will be remunerated.If the payee does not have an account in the US bank,several banks will need to be involved in the transaction chain.Large banks with international operations have establishe
325、d their own secure network for financial messaging the SWIFT network(see box on SWIFT in Section 4.2).The content of the messages is standardised so that the banks involved in the payment chain should be able to easily identify payment information such as the payees account number,the currency and t
326、he amount.The SWIFT network is used for payments for the import and export of goods and services and for messages in connection with trading in secu-rities and FX markets.In 2021,the value of cross-border payments to and from Norway using SWIFT messag-ing totalled more than NOK 15 000bn across about
327、 20m payments(Chart 4.4).In addition,foreign currency cheques are still used to some extent to pay for goods and services abroad,although their use is on the decline.In terms of numbers,international payment cards are used most for cross-border pay-ments,ie private individuals and businesses payment
328、s in connection with Norwegians travelling abroad and foreigners visiting Norway,and card payments for Norwegians e-trade with foreign operators and foreigners e-trade in Norway.In addition there is a separate cross-border payments service which is used by workers/residents in Norway who send money
329、to,for example,relatives in other countries.The 4 paymeNt iNfrastruCtureNORGES BANK FINANCIAL INFRASTRUCTURE REPORT 202239Chart 4.4 Cross-border paymentsPayments to and from Norway.2021336.120.00.10.8Number of payments.In millionsCard paymentsSWIFT transfersForeign currency chequesOther transfers 15
330、0.715 364364.524.8Value of payments.NOK bnSource:Norges Bankpayees in these cases may be located in regions without a well-established banking industry,and they may not have a bank account.Companies specialising in funds trans-fers are then used.These companies can make the transfer to and from bank
331、 accounts they hold in the payee and payer country,and if the payee does not have a bank account,the payment will be made in cash.This type of cross-border payment is far more impor-tant in other countries and regions than in Norway.Trading in FX markets involves cross-border payments when the parti
332、es to the trade are in different countries.Large banks that are active in FX markets have established their own financial infrastructure for the settlement of FX trades called CLS.Most FX trans-actions in the main currencies are settled through this system(Norges Bank(2021a).Cross-border payments be
333、tween parties to an FX trade that are settled through the CLS system are not discussed further here.Other aspects of cross-border paymentsThere have been some improvements in cross-border payment services in recent years.However,in general they are still costly and slow,with limited transparency compared with domestic payment services(see FSB(2020a).There are several reasons for this,and the chall