SNB’s Jordan Sees Policy Risk From Foreign-Currency Stable Coins

(Bloomberg) -- Swiss National Bank President Thomas Jordan said stable coins are likely to become more widely used than current crypto tokens, and warned they could hamper monetary policy in some circumstances.

In a speech on Thursday, he said a Swiss franc stable coin would have “no immediate impact on the effectiveness of our monetary policy.”

“However, if stable coins pegged to foreign currencies were to establish themselves in Switzerland, the effectiveness of our monetary policy could be impaired,” he said.

Central bankers have largely come out against cryptocurrencies, with European Central Bank Executive Board Member Benoit Coeure labeling Bitcoin “the evil spawn of the financial crisis.” Yet so-called stable coins, digital contracts pegged to a underlying assets such as real estate, stocks or a currency, appear to be getting a little bit less pushback.

Even so, Facebook’s plans to launch a stable coin called Libra is eliciting skepticism from central bankers and financial regulators around the globe.

Jordan also said that giving the general public access to a central bank-issued digital currency could pose a threat to financial stability by increasing the likelihood of a bank run.

Still, issuing an e-franc to financial market-participants might create efficiency gains in securities trading, settlement and management.

To contact the reporter on this story: Catherine Bosley in Zurich at cbosley1@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Zoe Schneeweiss

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