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Swiss Central Bankers: After Terra, regulators will favor centralized stablecoins

 



With regard to the possible competition between private sector stablecoins and state CBDCs, Dr. Moser is confident that both types of digital currency can coexist, as CBDCs only perform very basic functions, while stablecoins can be tailored for many other uses.


Asked about the spectacular collapse of the blockchain project Terra and the associated decentralized algorithmic stablecoin TerraUSD (UST), Dr. Moser that the Terra debacle could continue to have an impact on the regulation of (value) stable cryptocurrencies for a long time to come.


For example, regulators may now be forced to favor centralized stablecoins over decentralized variants like UST:


“I fear that regulators will lump all decentralized stablecoins in the same pot, although that's not right, but the risk is there. I therefore assume that regulation will favor centralized stablecoins.”

However, Moser believes it will take even longer for the crypto market to be fully regulated. In this respect, he refers to the Internet of the early 90s, because at that time it also took a long time for the supervisory authorities to formulate new, suitable regulations, since the existing legal framework was simply no longer up to date.


According to the central banker, this will now be repeated, because if the current regulation were simply transferred to the crypto industry, then a sector like Decentralized Financial Services (DeFi) would probably be completely scrapped:


“If you simply apply existing regulations to crypto, then DeFi will disappear. The reason for this is that there should then only be centralized projects that can be regulated under the applicable legal framework. With DeFi, there are no central entities to be held accountable, because they are basically just smart contracts interacting with each other, so it needs a completely different kind of regulation.”

In addition to China, the Swiss National Bank is one of the first central banks in the world to have already carried out concrete tests with a CBDC. The SNB initially tested its wholesale CBDC in January, which led to the conclusion that the SNB considers the risks of an introduction to be greater than the potential benefits.

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