By John Revill
ZURICH, Sept 30 (Reuters) – The Swiss National Bank is cautious about the use of digital stable coins, because the technology could make the transmission of monetary policy more difficult, governing board member Petra Tschudin said on Wednesday.
“When we introduce innovations, we really need to ask what consequences they have, and how they should be regulated,” Tschudin told an event in Zurich.
“If we end up with big stablecoins that are really far removed from the existing two-tier financial system, then that’s a situation which increases the burden on central banks in fulfilling their mandate.”
A stablecoin is a type of cryptocurrency designed to hold a steady value by being pegged to a stable asset, like the dollar or gold.
Tschudin said the SNB welcomed innovation, but was concerned about the impact stable coin technology could have on central bank money, the risk-free cash used to settle transactions between commercial banks.
Because stablecoins operate outside the central bank system, a “stablecoin franc” was not automatically guaranteed to be worth the same as a real franc, undermining the principle that money should be uniform everywhere, she said.
There was also a risk if households and businesses shift money they previously held at commercial banks into stablecoins – reducing the amount of money they could lend and affecting interest rates.
This would mean a central bank’s policy rate changes have less direct influence by weakening its ability to steer borrowing costs.
“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,” said Tschudin.
“So if we see this effect, we get a certain disruption to the transmission mechanism,” she said.
(Reporting by John RevillEditing by Dave Graham)
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