Navigating the Future: Insights on CBDCs, Stablecoins, and Regulations from the Swiss National Bank

Central Bank Digital Currencies and Stablecoins: A Coexistence Strategy

In a recent dialogue held at the European Blockchain Convention 2022, Thomas Moser of the Swiss National Bank shed light on the intricate dance between central bank digital currencies (CBDCs) and private stablecoins. His perspective underscores a potential coexistence where both entities can thrive.

Basic Functions Appealing to Consumers

Moser expressed that CBDCs are envisioned to fulfill fundamental banking functions, serving as a reliable digital form of money. He believes that private stablecoin operators can enhance customer experiences by layering additional services on top of CBDC infrastructure. It’s the classic “have your cake and eat it too” scenario, albeit one that adds a few extra icing options.

The Ripple Effects of TerraUSD’s Collapse

The recent scrutiny surrounding stablecoins has intensified, particularly following the collapse of Terra’s TerraUSD (UST). Moser acknowledged that this incident might compel regulators to rethink their strategies. He hinted at a possible shift where regulations may favor centralized stablecoins, cautioning that not all decentralized stablecoins should be treated equally. As he accurately put it, labeling all decentralized currencies under one umbrella would be a significant oversight.

Quote on Regulation Pessimism

“My fear is […] that people will throw all decentralized stable currency in the same kind of category, which is not true, you know, so there’s a danger. I think that regulation will favor centralized stablecoins.”

The Long Road to Regulation

When discussing the pace of regulatory developments, Moser offered a historical analog to the internet regulations of the 1990s, where lawmakers opted for a thoughtful approach over a rushed implementation of existing frameworks. He hinted that the road to roadblocks is rarely a straight path, especially in the evolving world of digital currencies.

DeFi Under the Radar

One of Moser’s most compelling points centered around decentralized finance (DeFi). He warned that if existing financial regulations were applied wholesale to the crypto space, DeFi as we know it could be severely compromised. Moser explained that current regulations favor centralized entities leaving the decentralized aspect of finance in a precarious position. As he noted, DeFi thrives on the idea of smart contracts interacting without the oversight of a singular accountable entity.

Switzerland’s Leading Role in CBDC Trials

Switzerland has distinguished itself by piloting CBDCs, with the Swiss National Bank conducting tests on wholesale CBDC transactions as early as January. The findings published later indicated a need for caution, suggesting that while innovative, the associated risks might overshadow the potential benefits.

Final Thoughts

As Moser indicated, the journey toward understanding digital currencies, whether by central banks or decentralized entities, is just getting started. Everyone keeps a close eye on how regulations evolve, eager to see if this outcome resembles chalk outlines of a game board where the pieces have yet to be placed.