UBS Chairman Axel Weber is urging Switzerland's policymakers to keep an open mind on digital currencies. What is the Swiss National Bank undertaking behind the scenes?
«We don’t respond to statements of third parties» – the reaction of the Swiss central bank when asked about a reaction to Axel Weber’s public broadside was typically dry. And only accurate in so far as the Swiss National Bank, or SNB, wouldn’t dream of issuing a public statement.
But Weber isn’t just any «third party»: as president of Switzerland's largest bank, as former chairman of the Bundesbank and once a prominent candidate for the chair of the European Central Bank, Weber’s voice carries weight in financial markets as well as central banking circles.
Monitoring Closely
Weber, a German who is highly respected in Switzerland, urged his former monetary comrades in arms to think about an e-Swiss franc.
«Whilst the official sector very often looks at the risks of these new means of payment, the private sector tends to look at the opportunities they offer,» Weber said earlier this month.
The SNB's dismissive response doesn’t tell the whole story: its banking operations unit under Andréa Maechler is far more actively monitoring developments in fintech and digital currencies than the central bank suggests.
Role Downplayed
A team run by Sébastien Kraenzlin is an active participant in international working groups such as at the Bank for International Settlements (BIS), finews.asia has learned. One of the groups that the SNB works with is the Committee on Payments and Market Infrastructures, an affiliate of the Basel-based central bankers' central bank.
The CPMI looks at payment systems and has taken on blockchain and distributed ledger technology. For now, the SNB appears to be happy working internationally – a contrast with Sweden, which advocates an e-krona backed by Riksbanken, Sweden's central bank.
SNB headThomas Jordan has downplayed the role of crypto currencies, calling them an issue for regulators, not policymakers: «Crypto currencies don’t pose a particular problem for monetary policy,» Jordan said on June 15.
Crypto vs E-Currency
However, Maechler, one of Jordan's two deputies, also said the central bank is eager to ensure a financial market infrastructure that was «solid and ready for the future».
Evidently, the SNB won’t currently be drawn on a response to the rise of the so-called crypto currencies. But what Weber had urged – an embrace of digital forms of currencies as a way to foster cheaper and more efficient payments systems – is a different question altogether.
Swedish E-Project
Sweden's Riksbanken has argued that as fewer consumers use cash, the e-krona would provide the general public with an additional means of payment guaranteed by the state and new payment firms would get access to the digital payment system.
Swiss consumers are still far more likely to use cash as a means to pay than the Swedes, as finews.asia has reported. But Weber has a point when he argues that payment patters change rapidly and that younger generations are eager users of electronic payment systems. Riksbanken said that the e-krona would actually make payment systems more robust in case of disruption to card services.
Faced with a fast changing financial world, it won’t come as much of a surprise if the SNB sooner rather than later delivers something meatier on how it plans to deal with the challenge posed to traditional money by the crypto-currency industry.
