The krone exchange rate is the price of our currency measured in a foreign currency. Developments in other countries are just as important for the krone as developments in the Norwegian economy. Capital flows freely and flows can change rapidly. This can spill over to exchange rates and interest rates as well as output and employment. There is a cost involved for businesses in hedging against fluctuations in the krone. A krone that is stable - but too strong - also entails social costs in the form of low activity. Likewise, a krone that is stable - but too weak - is a source of high inflation. Norway is running a current account surplus as a result of sizeable oil and gas exports. Owing to high oil prices, the current account surplus is rising this year. An increase in the current account surplus will normally result in higher net demand for the domestic currency. In Norway, however, the additional foreign exchange revenues that accrue to the Norwegian state as a result of high oil prices will be invested in foreign securities through the Government Petroleum Fund. As a result, they will not have a direct impact on the balance in the Norwegian foreign exchange market. Oil companies hold a large share of their financial capital in foreign currency, and higher revenues in these companies therefore results in an increase in capital outflows.
1/4  BIS central bankers' speeches  However, they could also reduce the efficiency of the overall financial system if their roll-out leads to a fragmentation of processes, and their interoperability and coexistence with existing systems are not properly organised, or, on the contrary, if they lead to the creation of monopolies. This latter risk stems from the growing interest of global digital giants in digital payment services. Thanks to their huge user bases and expertise in end-toend technology, Bigtechs have the potential to pose a major competitive threat to European payments’ players, who are less experienced in the digital sphere. They could also increase Europe’s reliance on foreign players for payment services, with all the data privacy and sovereignty challenges that this entails. This double-edged impact of innovation on financial system efficiency notably concerns the tokenisation of financial markets and, in general, the use cases of decentralised finance (DeFI). C) Innovation in the financial sector, especially the emergence of Bigtechs and the development of new settlement assets in the form of crypto-assets, raises new challenges for monetary sovereignty and stability. In particular, if stablecoins were rolled out on a massive scale by BigTechs (Facebook’s Diem project), they could be adopted as private settlement assets on a global scale, thanks to significant network effects.