Swiss Central Bank Sounds Alarm on Stablecoin Risks to Monetary Policy

The Swiss National Bank (SNB) has expressed concerns about the potential impact of stablecoins on monetary policy. According to Petra Tschudin, a member of the SNB's Governing Board, stablecoins could undermine the effectiveness of monetary policy by reducing the central bank's ability to influence borrowing costs and control financial conditions.

Tschudin noted that if stablecoins expand on a large scale and become increasingly separated from the existing financial system, risks would increase. She also highlighted the potential for individuals and companies to move funds currently held in commercial banks into stablecoins, which could reduce the funds available to banks for lending and make changes in central bank interest rates less effective.

The SNB is monitoring the impact of stablecoins on central bank money, which is used as a risk-free means of payment for settling transactions between banks. Tschudin emphasized that monetary policy works by influencing the amount of credit available and the cost of borrowing, and that if more funds move from banks into stablecoins, this could undermine the principle that money should have the same value across different places.