Digital currencies too early for Swiss central bank

Cryptocurrencies, such as bitcoin, have been criticised by the Bank for International Settlements for having a series of perceived technical flaws Keystone

The potential impact of cryptocurrencies and blockchain technology on the financial system needs more clarity before the Swiss central bank would consider issuing a digital franc, says board director Thomas Moser.

Moser’s comments on Thursday reflected the previously stated stance taken by the Swiss National Bank (SNB) towards an e-franc version of bitcoin. But Moser went further at the Crypto Valley blockchain conferenceExternal link in Zug, likening blockchain in its present form to the “useless innovation” of compact discs (CDs). 

The digitisation of music only became useful and practical once the innovation of streaming changed the landscape by providing a completely new model for consumers, Moser said. “Something similar has to happen with bitcoin,” he told an audience of blockchain enthusiasts. “People will only switch to something new if it works better or is cheaper.” 

Beyond the technological limitations of blockchain, the SNB is even more concerned about the potential impact on financial stability and monetary policy posed by digital currencies, Moser added.

Moser’s comments followed hard on the heels of a scathing critique of cryptocurrenciesExternal link by the Bank for International SettlementsExternal link (BIS). Earlier this week, the Basel-based “bank for central banks” lambasted cryptocurrencies, such as bitcoin, for a series of perceived technical flaws. These made them unsuitable as a global means of payment, BIS stated. 

In February, BIS general manager Agustin Carstens said cryptocurrencies had “become a combination of a bubble, a Ponzi scheme and an environmental disaster”. 

But while Moser ruled out SNB interest in blockchain currencies for the foreseeable future, he did acknowledge that the underlying technology could hold promise, but only once it “looks very different from what it does today”. 

‘Crypto Nation’ 

Other panellists in the “Future of Token Economy” discussion had a much more optimistic outlook for blockchain, predicting that the technology would be widespread and mainstream within five years. Others noted that central banks, which have a monopoly on creating money at present, have a vested interest in shooting down upstart decentralised cryptocurrencies. 

The conference did see one blockchain champion from the establishment: Swiss Economics Minister Johann Schneider-Ammann. In his opening address, he quipped that he had turned down an invitation to meet the pope, who was visiting Geneva on Thursday, in order to attend the Zug summit. 

Schneider-Ammann, who has previously stated his desire for Switzerland to become known as a “Crypto Nation”, took a more measured tone on this occasion, warning against the perils of both moving too slowly and too quickly into novel forms of innovation such as blockchain.

CVA Blockchain Conference

 The CVA blockchain conference runs from June 20-22 in Zug, Switzerland. It aims to showcase blockchain research from Switzerland and abroad. 

It has been endorsed by the Institute of Electrical and Electronics Engineers (IEEE)External link, whose seal of approval is a gold standard in the research industry. 

It brings together some of the leading lights in blockchain research from IBM, Cisco, the University of California, Berkeley, Edinburgh’s Napier University, Imperial College, London, and Cornell University of New York. 

The conference has also invited researchers and academics to submit papers on their blockchain projects to be presented during the event. swissinfo.ch is an official media partner of the event.