Central Bank Cryptocurrencies Are Risky – Swiss National Bank’s Maechlerbr>
Andrea Maechler, Swiss National Bank (SNB) Governing Board member, said Thursday that central bank cryptocurrency for the general public is not necessary to ensure an efficient system for cashless retail payments.
Maechler told an audience in Zurich that private-sector cryptocurrencies were better and less risky than any version that might be offered by a central bank. She said that central bank digital currencies would deliver scarcely any advantages, but would give rise to incalculable risks with regard to financial stability by calling into question the tried-and-tested two-tier system.
Maechler said cryptocurrencies are not true competitors to conventional currencies and the hype built up around them far outweighed their actual use.
“Money must be a viable medium of exchange and be a stable unit of account for the value of the goods and services that are exchanged,” she said. “It should also be used as a long-term store of value; for example, for saving. Cryptocurrencies such as the much-discussed bitcoin do not perform these functions adequately, if at all. Digital currencies have a high degree of price volatility and are more of a speculative investment instrument than a means of payment capable of maintaining their value.”
While Maechler struck a critical tone regarding cryptocurrencies, she believes the technology behind digital currencies has the potential to reduce costs, improve efficiency and add transparency to securities settlement and cross-border payments.
“Because blockchain makes verified information available to a large number of parties simultaneously, it is particularly appealing in the case of complex processes where coordination is required across a range of participants,” said Maechler.
However, Maechler warned that the technology does not yet meet the requirements expected of the real-time gross settlement systems (RTGS) in terms of scalability, data security and reliability.
“There were still improvements necessary before market-ready blockchain solutions became a reality in the financial market,” Maechler said.