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Regulators to Favor Centralized Stablecoins After Terra Debacle

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VOC, Voice of Crypto, Bitcoin, BTC

The deputy head of the Swiss National Bank, Thomas Moser, spoke on CBDC trends after the recently concluded European Blockchain Convention (EBC) 2022. Speaking to the news, he also said about the SNB regulations and stablecoins

Moser spoke about the adoption and innovation of private stablecoins as well as central banks launching their CBDCs. According to Moser, both stablecoins and CBDCs can exist together. He also said the function of CBDCs would be simple, while private stablecoin issuers can include services to the CBDCs to meet retail customers’ needs. 

Read about Terra collapse here.

Furthermore, Moser was asked what he thought of Terra’s UST that collapsed recently and its impact on regulations. Responding to the question, he said Terra’s crash and its algorithmic stablecoin, UST, will likely significantly impact regulators. 

Additionally, he said that centralized stablecoins might be favoured by regulators over their decentralized counterparts. However, he said not all decentralized stablecoins are like Terra UST. 

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He said,

My fear is that people will throw all decentralized stable currency in the same kind of category, which is not true, you know, so there’s a danger. So I think that regulation will favor centralized stablecoins.

Speaking on the present financial regulations in the Crypto industry, Moser said that decentralized finance, otherwise known as the DeFi ecosystem, is likely to be wiped off if the regulations are implemented. 

He said,

if you just take the existing regulation and put it on crypto, then defi will disappear. Because you will only have centralized entities that you can regulate with the current regulation. For DeFi, where there is no single entity to be held accountable for, which is really just small contracts interacting, you need a different type of regulation.

Alert from China, the central bank of Switzerland is one of the few that has begun its CBDCs. In January this year, Switzerland’s central bank tested wholesale CBDCs. Also, a report on the SNB’s trials was published that same month. The report implied that the risks of CBDCs are more than the benefits.

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