Stablecoins could hinder monetary policy: Swiss central bank

Switzerland's central bank is concerned about the impact of stablecoins Keystone / Peter Klaunzer

Stablecoins could complicate the transmission of monetary policy, one of the Swiss National Bank’s (SNB) three interest rate-setters said, calling for a regulation that safeguards the influence of policymakers.

“Modernising the payment system is sensible,” governing board member Petra Tschudin said Wednesday at an event in Zurich.

But large stablecoins that are not integrated in the existing two-tier financial system, frame “a situation where it’s harder for central banks to fulfill their mandate,” she added.

The remarks build on the SNB’s pronounced scepticism on stablecoins and crypto assets, even as it’s at the forefront of experimenting with digital forms of central-bank money.

The institution started three years ago to issue a blockchain-based digital currency for banks – a so-called wholesale CBDC – and said that the project will continue until at least 2028.

On stablecoins, the institution has warned that the assets potentially can’t deliver on promised at-par convertibility. Still, it said that local financial stability risks from the assets are small due to low volumes and low adoption.

Tschudin stressed on Wednesday that stablecoins can also improve the current financial system, for example by allowing international companies to send money around the world at lower costs.

“There’s a competition between commercial banks and stablecoins,” she said. “And in itself, competition, rivalry is a good thing, it brings innovation.”

The policymaker, who manages the SNB’s large foreign-exchange portfolio and its digital projects, spoke to an audience of professional forecasters at ETH Zurich’s KOF economic research institute.

The SNB’s tokenized currency can’t be held by consumers. That makes it different from other CBDC pilots such as those in China or the euro area, which focus on retail applications.

Tschudin reiterated the bank’s view that the benefits of such retail CBDCs don’t outweigh the risks. She added that the SNB’s CBDC isn’t used much.

“It’s not extremely big volumes that are traded there,” she said. “We believe things go in that direction, but the big lift-off hasn’t happened yet.”

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