Zurich – The Swiss National Bank (SNB) is sounding a careful note on the rapid growth of digital stablecoins, warning that the technology could make the transmission of monetary policy more difficult. Governing board member Petra Tschudin told an event in Zurich that while the SNB welcomes innovation, it must first assess the consequences for the nation’s financial stability.
Stablecoins and the two‑tier system
Stablecoins are a type of cryptocurrency designed to hold a steady value by being pegged to a stable asset such as the U.S. dollar or gold. Because they operate outside the traditional banking system, a “stablecoin franc” would not automatically be guaranteed to equal a real franc, potentially undermining the principle that money should be uniform everywhere.
Potential impact on central‑bank money
Tschudin explained that the SNB is concerned about the effect stablecoins could have on central‑bank money – the risk‑free cash used to settle transactions between commercial banks. If households and businesses shift funds they previously kept at commercial banks into stablecoins, the amount of money available for banks to lend could shrink, influencing interest rates and weakening the central bank’s ability to steer borrowing costs.
Transmission mechanism at risk
“We have an effect on how much credit, or how expensively credit is made available in the economy, and that naturally has knock‑on effects for monetary policy,” Tschudin said. “So if we see this effect, we get a certain disruption to the transmission mechanism.” In other words, the SNB worries that large, widely used stablecoins could dilute the impact of policy‑rate changes, making it harder for the bank to achieve its mandate of price stability.
Calls for thoughtful regulation
When asked about how the SNB plans to address the issue, Tschudin emphasized the need for a balanced approach. “When we introduce innovations, we really need to ask what consequences they have, and how they should be regulated,” she said. The board member urged policymakers to consider safeguards that preserve the integrity of the monetary system while still allowing beneficial technological progress.
International context
Switzerland is not alone in grappling with stablecoin risks. Central banks worldwide are monitoring the rise of digital assets that could bypass traditional financial intermediaries. The SNB’s cautious stance aligns with a broader trend of regulators seeking to ensure that new financial technologies do not erode the effectiveness of monetary policy tools.
What this means for Swiss citizens
For everyday Swiss families and businesses, the SNB’s warning serves as a reminder to weigh the stability and regulatory protections of traditional bank deposits against the allure of digital assets. While stablecoins promise price stability, they currently lack the guarantee of central‑bank backing, which could expose users to unforeseen risks.
Looking ahead
The SNB will continue to monitor the development of stablecoins and work with international partners to shape a regulatory framework that protects the Swiss financial system. As the digital currency landscape evolves, the central bank’s vigilance aims to safeguard the effectiveness of monetary policy and the stability of the franc for future generations.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
