Private digital currencies are better than any state-issued version, admitted a high-ranking representative of the Swiss National Bank. Cryptocurrencies are also less risky, according to Andrea Maechler, member of the central bank’s governing board. Her comments indicate that Switzerland has no intentions to emit a state-sponsored crypto.
Digital Central Bank Money Brings Risks
“Private-sector digital currencies” are better and less risky than any version that might be offered by a central bank, the representative of the Swiss National Bank’s management thinks. “Digital central bank money for the general public is not necessary to ensure an efficient system for cashless retail payments”, Andrea Maechler said during an event in Zurich. She went on to explain why a crypto issued by a central bank could increase the risk of bank runs.
A government-backed cryptocurrency would make it easier for people to transfer money out of their accounts, if they felt a bank was in difficulties. “It would deliver scarcely any advantages, but would give rise to incalculable risks with regard to financial stability,” Maechler said, quoted by Reuters. In her option, a state-issued cryptocurrency would be calling into question the „tried and tested two-tier system” in which the SNB acts as a bank to commercial banks, which in turn deal with end customers.
Not all of Mrs. Maechler’s remarks were positive about cryptos. She thinks “cryptocurrencies are not true competitors to conventional currencies”, despite the soaring interest in bitcoin. The hype has outweighed their actual use, the banker says. SNB’s representative also pointed out that money must be a viable medium of exchange, a stable unit of account and a long-term store of value – functions that, in her words, cryptos don’t perform. Digital coins are also highly volatile, and a speculative investment instrument rather than a means of payment, she added.
However, neither the unexpected recognition of cryptos, nor the usual talking points against them, are what makes Andrea Maechler’s speech important. What deserves attention is the indication that the central bank and the government of Switzerland have no immediate plans, or even desire, to launch a state-sponsored cryptocurrency.
Cryptos Have What Swiss Banks Used to Offer
With an “e-franc” project, Bern could join a club of governments tempted to control at least one “crypto”. The leader in this competition, Venezuela, became the first country with a state-issued digital coin. The ”oil-backed” petro comes to partially replace the hyperinflated fiat bolivar. Russia has been mulling over a cryptoruble but the idea has been put on the backburner for now. Its central bank thinks it is “not appropriate”, and the finance ministry informed Putin a centralized crypto is not even possible. Sweden has been thinking about an “e-krona”, and Poland is reportedly developing an “e-złoty”.
Switzerland, however, has never been eager to join clubs of any kind, it takes pride in its independence. Swiss banking practices have been a good example of that for many years, before pressures from tax authorities, both American and European, increased. The attitude towards cryptocurrencies may become another proof of Switzerland’s independence.
The Alpine confederation is already regarded as a crypto-friendly jurisdiction, where many crypto businesses are headquartered or represented. It has become one of the first countries to establish a crypto valley, in the Canton of Zug. The Chinese mining giant Bitmain opened a branch there, and one of Russia’s largest banks, Gazprombank, announced plans to test cryptocurrency deals in Switzerland.
Decentralized, unregulated cryptocurrencies offer what the country provided to Swiss bank account holders for a very long time – security and anonymity. Sometimes it looks as if Switzerland is wondering whether it can do it again in a crypto environment.
Do you think Switzerland will continue to embrace cryptocurrencies? Share your expectations in the comments section below.
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