Swiss National Bank (SNB) Deputy Director Thomas Muser spoke with Cointelegraph editor Aaron Wood and discussed current trends in central bank digital currencies (CBDCs), stablecoins and regulations, during the recently concluded European Blockchain Convention (EBC) 2022.
Discussing the innovation and adoption of private stablecoins and the plans of central banks in relation to launching CBDCs, Moser said that the two can co-exist. He said that heThe function of the CBDC would be very basic and that private stablecoin issuers can add services on top of them to meet the needs of retail customers.
When asked about the recent collapse of Terra’s UST and its subsequent impact on regulations, Moser said that The recent downward spiral of Terra and its decentralized algorithmic stablecoin UST could have a lasting impact on regulators.
He added that regulators could be forced to favor centralized over decentralized stablecoins, although not all decentralized stablecoins are like UST. He said:
“My fear is that that, that people classify all decentralized stablecoins in the same kind of category, which is not true, you know, then there is a danger. I think regulation will favor centralized stablecoins.”
When asked about developments on the regulations front, Moser hinted that it could take time. He cited the example of Internet regulations from the 1990s, where regulators took the time to craft new rules rather than implement existing telephone regulations.
Moser said that If the current financial regulations in the cryptocurrency industry are implemented, the decentralized finance (DeFi) ecosystem would cease to exist. He explained:
“If you just take existing regulation and put it on top of crypto, then defi will go away. Because you will only have centralized entities that you can regulate with the current regulations. For DeFi, where there is no single entity to be accountable to, which is really just small contracts interacting, a different type of regulation is needed.”
Switzerland’s central bank is among a select few that have started the pilot for their domestic CBDCs, in addition to China. The central bank conducted tests of wholesale CBDCs in January this year. Later in the same month, SNB published a report based on their trials and suggested that the risks outweigh the benefits.
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