While addressing the audience in Zurich, the SNB board member stated that as compared to government-issued crypto, private virtual currencies are better
According to Andréa Maechler, a member of the Swiss National Bank’s governing body, private cryptocurrencies have advantages over central bank digital currencies (CBDC) as the latter ones pose threat to financial stability.
A high-ranking representative of the Swiss National Bank believes that central bank digital currencies (CBDC) would threaten financial stability and will offer only a few tangible benefits. According to Andrea Maechler, a member of the central bank’s governing board, private cryptocurrencies have advantages over central bank digital currencies (CBDC).
While addressing the audience in Zurich, the SNB board member stated that as compared to government-issued crypto, private virtual currencies are better and less risky.
“Digital central bank money for the general public is not necessary to ensure an efficient system for cashless retail payments. It would deliver scarcely any advantages, but would give rise to incalculable risks with regard to financial stability,” opines Maechler.
Praising the Distributed Ledger Technology (DLT), of which Blockchain is a type, Maechler said that she sees the technology as having the potential to decrease costs, improve efficiency and add transparency to securities settlement and cross-border payments. Although, she added that DLT as compared to RTGS (Real-Time-Gross-Settlement) payment systems, lacks data security and reliability.
She also believes that crypto issued by a central bank could increase the risk of bank runs. This means when bank customers doubt its solvency, they would start withdrawing funds.
However, the central banker was not completely in favor of decentralized cryptocurrencies. She believes that virtual currencies cannot replace the traditional currency requirements. According to Meachler, cryptos lack basic criterion of money which includes, a medium of exchange, a vehicle for long-term value retention, and a stable unit of account.
Her comments regarding drawbacks of a national digital currency are in complete contrast with many other countries considering to launch their own crypto. For instance, China, in March indicated its interest in coming up with its own CBDC so as to support the Chinese Yuan (RMB). Furthermore, the Reserve Bank of India (RBI) on April 5 declared that the central bank is exploring the potential of national cryptocurrency.
Maechler’s comments indicate that Switzerland has no intentions to launch its own crypto. It is to be noted that recently, a researcher at fintech company R3 has forecasted that 2018 may witness the implementation of CBDCs.
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