The Conflicted Views on Cryptocurrencies
In a recent address at the University of Basel, SNB President Thomas Jordan shared his skepticism about the role of cryptocurrencies in the modern financial ecosystem. He categorically stated that cryptocurrencies, in their current form, struggle to serve as effective payment instruments, stores of value, or units of account. Major fluctuations in value make them more of a speculative bet than ‘good’ money.
Characteristics of Good Money
Jordan outlined the classic characteristics of money that users deem valuable: stability in value, broad acceptance, and efficiency in payments. Unfortunately, cryptocurrencies fall short on most of these criteria. For him, using crypto tokens as money in Switzerland seems like more of a leap of faith—a bet on the future rather than a sound monetary practice.
The Threat of Foreign-Pegged Stablecoins
The SNB President raised alarms regarding stablecoins that peg their value to foreign currencies, warning that their adoption could undermine Switzerland’s monetary policy. He emphasized that while a Swiss franc stablecoin might not jeopardize policy effectiveness immediately, foreign stablecoins could lead to significant complications.
Central Bank Digital Currency Concerns
While the SNB is open to the idea of a central bank-issued digital currency, Jordan raised a critical point: unrestricted public access to such a currency might elevate the risks of bank runs. The prospect of a digital franc circulating broadly could make it all too easy for the public to withdraw their funds from banks in times of uncertainty.
Keeping an Eye on Libra
Jordan acknowledged the ongoing developments and potential implications of Facebook’s Geneva-based crypto initiative, Libra. The SNB is in close contact with regulatory authorities to monitor the situation, although SNB vice-chairman Fritz Zurbruegg admitted that the ambiguity of the information leaves much to be desired. It appears that until more clarity arises, the fate of Libra remains uncertain.
