Libra-Like Tokens Are A Threat To Swiss Bank’s Monetary Policy

Libra-like tokens are posing a threat to the Swiss National Bank monetary policies because they can impede the capability of the bank to initiate and implement monetary policies as we are reading today in the altcoin news reports.

The SNB’s chairman of the governing board Thomas Jordan concluded that the Libra-like tokens are dangerous. The discussion around Libra has already caused mass panics and concerns as the SNB chairman found the opportunity to express his worries about how such digital currencies could intervene with the central banks potential to handle the monetary policies. Also, the Libra Association has its headquarters in Geneva so a reaction from the Swiss authorities was predictable. While speaking on the 30^th anniversary of the University of Basel’s Faculty of Business and Economics, Thomas Jordan pointed out that a stablecoin pegged to the Swiss franc will pose a huge threat as he explained:

‘’As long as prices, wages and loans are set in Swiss francs, the SNB can influence incentives for savers and borrowers via its monetary policy and thus ensure price stability over the medium term. However, if stablecoins pegged to foreign currencies were to establish themselves in Switzerland, the effectiveness of our monetary policy could be impaired.
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’’

Jordan is not alone in his stance. Yves Mersch stated on Sunday as a member of the European Central Bank that the widespread adoption of Libra will be perceived as a threat to the ECB’s ability to manage monetary policies:

 “Depending on Libra’s level of acceptance and on the referencing of the euro in its reserve basket, it could reduce the ECB’s control over the euro, impair the monetary policy transmission mechanism by affecting the liquidity position of euro area banks, and undermine the single currency’s international role, for instance by reducing demand for it.’’

Besides Libra, the SNB head also mentioned Bitcoin saying that it has a massive influence into the way we perceive ‘’crypto tokens’’ in general. According to him, it is very highly unlikely that cryptocurrencies will be used as means of payment in Switzerland. A central bank can issue its own digital token which is pegged to cryptocurrency but Jordan would rather choose another approach in which the tokens issued by the central bank are only available to commercial banks and other institutions as we read in the latest cryptocurrency news before.