While the use of cryptocurrencies has continued to surge in recent years, the president of the Swiss National Bank doesn’t think they’ll ever be used widely as money in Switzerland. Speaking at the University of Basel, Thomas Jordan referred to cryptos as mere speculative instruments. However, he believes that stablecoins could change the game.
“We believe that cryptocurrencies and cryptocurrency-based tokens are of only limited use as payment instruments, stores of value and units of account because they are subject to major fluctuations,” Jordan stated.
Money is only good if it has a stable value over time, is broadly accepted and enables efficient payments, he believes.
The regulator then delved into stablecoins which according to him can fulfill the role of money if they are pegged to stable fiat currencies. But even with stablecoins, there are factors that must be considered, including whether the pledge to peg the stablecoin to a fiat currency is legitimate or just a mere statement of intentions.
The financial industry regulators in Switzerland must implement policies that protect the consumers if stablecoins are to become widely used in the country, he went on. For one, the stablecoin issuers must abide by the same rules as the banks, seeing that they are substituting for banks.
Whether or not a banking licence is required, stablecoin issuers must abide by certain regulations just like any other financial market participant. These range from investor and data protection to rules on combating money laundering and terrorism financing. As you see, ladies and gentlemen, stablecoins present many regulatory challenges, which in turn require close cooperation between the various authorities.
Jordan also believes that for a stablecoin to be effective in Switzerland, it has to be pegged to the Swiss franc. This will allow the government to still have control over the monetary system. Pegging a stablecoin to a foreign currency would erode the ability of the government to influence monetary policies and make the country reliant on foreign currencies.
Switzerland has been one of the pioneers in the cryptocurrency industry, with the city of Zug becoming known as the crypto valley thanks to the high number of crypto startups that have set up operations there. Just recently, Swiss regulators granted a banking license to Sygnum, a crypto startup.
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