Swiss National Bank Chairman Jordan – “stablecoins could hamper monetary policy”

The Swiss National Bank Chairman Jordan says stablecoins could hamper monetary policy.

He also commented that stablecoins should be regulated like banks.

For once I may side with the banker. There is one issue that many crypto traders might not have considered. If the central banks regulate monetary policy based on flow of their own currencies but now they are being replaced with pegged coins. The implementation of stablecoins could restrict flow that would usually go into the main fiat currency.  

Example:  

Binance are now reportedly going to release a USD stable could (BUSD) and they also have a GBP pegged coin BGBP.  

So if traders trade to trade BGBP vs BUSD it is essentially GBP/USD with no actually flow into the underlying currency.  

Now we are still in the early days of this conundrum, imagine if cryptocurrency adoption grows tenfold. This could be a massive issue.

SNB’s Jordan’s comments:

A stablecoin linked to the Swiss franc alone would create fewer problems, Jordan said, as it would be “another Swiss franc-denominated form of money alongside bank deposits and cash.”

“As long as prices, wages and loans are set in Swiss francs, the SNB can influence incentives for savers and borrowers via its monetary policy and thus ensure price stability over the medium term,”

“If the economic function of stablecoins is comparable to that of bank deposits, their issuers should have to play by the same rules as banks,”  

“Stablecoins present many regulatory challenges, which in turn require close cooperation between the various authorities. This is particularly true of cross-border projects like Libra,”  

So there you have it there are many problems as well as solutions. I will say this the SNB currently has negative interest rates so a CHF pegged stablecoin could be very worrying for the SNB as to hold your FX reserves in a coin matching the CHF rate that doesn’t have negative rates would be detrimental to them (Swiss National Bank). I do not blame them for feeling under threat.