Earlier this week, Thomas Jordan, the President of the Swiss National Bank, expressed his concerns that stablecoins could pose issues for the country’s monetary policy in certain circumstances.
Jordan’s comments were made in a speech at the University of Basel. While speaking, he revealed that he is convinced that the use of crypto assets for major currency applications such as units of account, store of value, and means of payments is somewhat limited, especially as the assets are subject to some major fluctuations. Given the latest Bitcoin trading patterns, it’s difficult to argue with that point.
He added that cryptocurrencies are more like speculative assets than “good money,” over time.
“Users typically describe money as ‘good’ if it has a stable value over time, is broadly accepted, and enables efficient payments. Given these parameters, it seems unlikely that crypto tokens will be widely used as money in Switzerland,” he added.
He went on to speak about the prospect of stablecoins, saying that the establishment of crypto assets which have been pegged to foreign currencies in Switzerland could provide some impaired effects on Switzerland’s monetary policy.
He posited that a stablecoin pegged to the Swiss franc would have no immediate impact on the effectiveness of the monetary policy, although he also expressed skepticism over a Central Bank Digital Currency because public access to these could also increase the likelihood of a bank run. He believes that over time, these could hamper financial stability.
His view on stablecoins is especially harrowing, considering that Switzerland is the proposed landing spot for Libra, a stablecoin project coming from social media giant Facebook. In the now not-so-recent whitepaper for Libra, Facebook announced that the Libra Association, a governing body for the stablecoin, will be based out of Switzerland.
Switzerland has been seen by many as a rather friendly state for cryptocurrency exchanges and other businesses in the industry, but if regulators and the financial industry, in general, aren’t willing to accept stablecoins, then it might be time for a lot of stablecoin operators (including and especially Facebook) to rethink any plans to situate their projects in the country.
Facebook has especially come under fire for its ambition to base the Libra Association in Switzerland. In a congressional hearing back in July, David Marcus, Head of Blockchain at the social media company, revealed that the Libra Association would be overseen by the Swiss Federal Data Protection and Information Commissioner (FDPIC), Switzerland’s federal data protection agency.
However, about a day after, FDIPC Communications Head Hugo Wyler revealed that there hadn’t been any communications between Facebook and the agency. In part, Wyler said, “We have taken note of the statements made by David Marcus, Chief of Calibra, on our potential role as data protection supervisory authority in the Libra context. Until today we have not been contacted by the promoters of Libra.”
This also isn’t for lack of trying. The Swiss agency eventually sent a letter to Facebook, asking for clarity on their stablecoin, but according to a statement subsequently released, the social media company had not responded.
For now, however, Reuters has reported that Fritz Zurbruegg, the Vice President of the Swiss National Bank, has revealed that the institution is in close contact with Facebook over Libra.