Cross-border movement of domestic currency due to transactions with offshore króna assets falling under Act on the Treatment of Króna-Denominated Assets Subject to Special Restrictions are prohibited.

It is only permissible to conduct derivatives transactions with financial undertakings in Iceland, where domestic currency is used in a contract against foreign currency, for the purpose of hedging against risk, provided that a foreign exchange imbalance exists over the duration of the derivative contract and the Central Bank of Iceland has confirmed that the transaction is a hedging instrument. It is required that such hedging instruments reflect the foreign exchange imbalance, and contracts shall be amended accordingly if the premises for them change; i.e., underlying assets are sold or debts settled prior to maturity. Derivatives transactions are also subject to the condition that the contracts may not be transferred, directly or indirectly, to a third party prior to maturity.

The term derivatives transactions refers to transactions with financial instruments pursuant to Article 2, Paragraph 1, Items 2(d)-2(h) of the Act on Securities Transactions.

Derivatives transactions due to hedging in connection with bonds issued abroad in domestic currency do not fall under the above-described exemption.

The Central Bank may revoke its confirmation that a transaction is a hedging instrument if it concludes that the premises for the hedging no longer exist.

The contents of requests for confirmation according to the above shall be as is provided for in Article 13 of the Rules on Foreign Exchange, no. 200/2017.

Requests for confirmation of derivatives trading for hedging purposes shall be sent in electronic form to the Central Bank at the e-mail address ge.gagnaskil@sedlabanki.is

Foreign exchange transactions carried out between residents and non-residents without the intermediation of a financial undertaking are prohibited.