SNB rejects idea of retail central bank digital currency...maybe

SNB rejects idea of retail central bank digital currency 
Governing board member Andrea Maechler says central bank digital currency would bring “incalculable risks”, and denies that crypto tokens are “comparable with” money andrea-maechler SNB board member Andrea Maechler: central bank digital currency could “give rise to incalculable risks”
https://www.centralbanking.com/central-banks/currency/digital-currencies/3447396/snb-rejects-idea-of-retail-central-bank-digital-currency

 Central Banking Newsdesk 06 Apr 2018 
 Bank for International Settlements Currency Distributed ledger

The Swiss National Bank has come out against the idea of creating a central bank digital currency that would be accessible to the general public. Andrea Maechler, a member of the SNB’s governing board, set out the bank’s stance in a speech on April 5, saying such a currency “would give rise to incalculable risks with regard to financial stability”. By offering people an easy route to flee to safety, a central bank digital currency could add to the threat of bank runs. “Instead of operating as the bankers’ bank as it does today, the SNB would be acting as a commercial bank for end customers,” said Maechler. “Moreover, Switzerland would be alone in adopting such a solution: no other central bank has implemented such a solution to date.” Related articles RBI to consider launching digital currency Danish central bank dismisses central bank digital currency New paper examines central bank digital currency models How crypto is my currency? She was scathing about attempts to replace central bank money with private crypto tokens, such as bitcoin, arguing these were “not comparable [to] money”. They are not widely used as a medium of exchange, they are not a stable unit of account, and they are a poor long-term store of value, she argued. “Trust is the very essence of a stable currency,” said Maechler. “This trust cannot evolve without a solid framework, including a state governed by the rule of law, a sustainable economic and fiscal policy, and also an independent central bank.” However, echoing several other central bankers, Maechler said the underlying distributed ledger technology did have some potential. DLT, she noted, makes “verified information” available to a large number of entities simultaneously, making it “particularly appealing” for handling complex processes that require co-ordination. Possible applications include securities settlement and cross-border payments, said Maechler. While the SNB welcomes the progress so far, “there is still a long way to go before market-ready DLT solutions become a reality”. The board member stressed the importance of having ultra-reliable infrastructure underpinning the financial system – notably the real-time gross settlement systems operated by central banks. “Could DLT also be used in real-time gross settlement systems in the future – ie, as part of the reliable foundation?” she asked. “We see a number of questions that are still to be resolved here.” As yet, the technology does not meet the required standards for scalability, data security and reliability, she said. It is conceivable, however, that a DLT-based securities settlement system would need to link up with the real-time gross settlement system, added Maechler. That could happen via some sort of “technical interface” or it could involve a more radical integration of the systems, by having the private operators of the settlement system issue a token, against which securities could be settled. The token would be equivalent to commercial bank money, and would be fully secured by central bank money, she said. She noted central bank money could also be “tokenised”, but said there are “a number of questions” still to be answered in this regard. The Monetary Authority of Singapore is one central bank investigating this further.

SNB rejects idea of retail central bank digital currency Governing board member Andrea Maechler says central bank digital currency would bring “incalculable risks”, and denies that crypto tokens are “comparable with” money andrea-maechler SNB board member Andrea Maechler: central bank digital currency could “give rise to incalculable risks” Central Banking Newsdesk 06 Apr 2018 Tweet Facebook LinkedIn Save this article Send to Print this page Followi Bank for International Settlements Currency Distributed ledger The Swiss National Bank has come out against the idea of creating a central bank digital currency that would be accessible to the general public. Andrea Maechler, a member of the SNB’s governing board, set out the bank’s stance in a speech on April 5, saying such a currency “would give rise to incalculable risks with regard to financial stability”. By offering people an easy route to flee to safety, a central bank digital currency could add to the threat of bank runs. “Instead of operating as the bankers’ bank as it does today, the SNB would be acting as a commercial bank for end customers,” said Maechler. “Moreover, Switzerland would be alone in adopting such a solution: no other central bank has implemented such a solution to date.” Related articles RBI to consider launching digital currency Danish central bank dismisses central bank digital currency New paper examines central bank digital currency models How crypto is my currency? She was scathing about attempts to replace central bank money with private crypto tokens, such as bitcoin, arguing these were “not comparable [to] money”. They are not widely used as a medium of exchange, they are not a stable unit of account, and they are a poor long-term store of value, she argued. “Trust is the very essence of a stable currency,” said Maechler. “This trust cannot evolve without a solid framework, including a state governed by the rule of law, a sustainable economic and fiscal policy, and also an independent central bank.” However, echoing several other central bankers, Maechler said the underlying distributed ledger technology did have some potential. DLT, she noted, makes “verified information” available to a large number of entities simultaneously, making it “particularly appealing” for handling complex processes that require co-ordination. Possible applications include securities settlement and cross-border payments, said Maechler. While the SNB welcomes the progress so far, “there is still a long way to go before market-ready DLT solutions become a reality”. The board member stressed the importance of having ultra-reliable infrastructure underpinning the financial system – notably the real-time gross settlement systems operated by central banks. “Could DLT also be used in real-time gross settlement systems in the future – ie, as part of the reliable foundation?” she asked. “We see a number of questions that are still to be resolved here.” As yet, the technology does not meet the required standards for scalability, data security and reliability, she said. It is conceivable, however, that a DLT-based securities settlement system would need to link up with the real-time gross settlement system, added Maechler. That could happen via some sort of “technical interface” or it could involve a more radical integration of the systems, by having the private operators of the settlement system issue a token, against which securities could be settled. The token would be equivalent to commercial bank money, and would be fully secured by central bank money, she said. She noted central bank money could also be “tokenised”, but said there are “a number of questions” still to be answered in this regard. The Monetary Authority of Singapore is one central bank investigating this further.

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