It's definitely not Iceland as a whole doing this; Ögmundur Jónasson will probably be voted out before this can come to pass. However, the reason this is a thing at all is because of the "nei ýðir nei!" (no means no!) popular movement in response to increasing reports of rape against women by inebriated men.
Having said that, in my humble opinion, internet porn and the numerous adult toy shops should of course continue to be available as healthy outlets for consenting adults; on the other hand, Iceland's ingrained binge drinking culture should be held up to scrutiny, which seems to be bolstered by the government monopoly on booze not sold in restaurants nor bars.