Avenir Suisse released a report recommending the creation of a central bank operated stablecoin in Switzerland. The researchers suggest the time for trials has passed and the government and its institutions need to step up their game.
Avenir Suisse, one of the most influential think tanks in Switzerland, published a report called “Blockchain After the Hype” It provides an overview of Switzerland’s current blockchain scene and gives recommendations on how the government can boost blockchain developments in the country.
One recommendation in particular has received attention: Avenir Suisse suggested the Swiss National Bank (SNB) – which is Switzerland’s central bank – should issue a national cryptocurrency. A “Franc Token” would be the next step forward when creating a domestic token economy, the researchers say.
Currenct cryptocurrencies deemed unsuitable as means of payment
According to Avenir Suisse, most current cryptocurrencies are not suitable as a means of payment. While a currency like the Swiss franc is backed by the stability and strength of Switzerland’s economy and its economic and political institutions, cryptocurrencies like Bitcoin are solely based on the investor confidence of a relatively small and anonymous network.
Avenir Suisse argues current cryptocurrencies will remain volatile and unreliable for everyday use. The think tank sees them more as a vehicle to diversify traditional portfolios, as they are uncorrelated to traditional asset classes such as equity or fixed income.
However, a functioning token economy needs a reliable currency that is integrated into the country’s blockchain infrastructure. Therefore, Avenir Suisse recommends the creation of a government-based stable coin.
SNB could issue franc tokens to SIC-compatible financial institutions in exchange for Swiss francs
On the contrary to what has been portrayed in the media, the idea was not to replace Switzerland’s fiat currency with a digital currency. Instead, the SNB should create a stablecoin backed by the Swiss franc that can be used as means of payment within a digital ecosystem.
Any financial institution that is compatible with the Swiss Interbank Clearing System (SIC) could deposit Swiss francs with the SNB and withdraw Franc Tokens in return.
In practice, it would not even need the SNB to create such a token. The leading Swiss stock exchange SIX is already working on a Swiss franc-backed stablecoin. However, Avenir Suisse recommends cooperation between the SNB and private actors to provide maximum security and stability.
SNB not yet convinced of cryptocurrencies
The report predicts a Franc Token would transform Switzerland into a blockchain nation. “It would facilitate tokenized securities trading if the National Bank and major players in the industry were to drive the development of a Swiss franc token,” the report reads.
The SNB has so far been rather unswayed by the idea of a central bank cryptocurrency. Other nations have already launched pilot projects, while the SNB is still caught up in internal discussions. The report may give decision makers a gentle push.
Avenir Suisse also advocated legal changes to accommodate blockchain developments. “The law should be changed only in areas where it’s not yet DLT-compatible. But these changes have to be made as soon as possible,” says the think tank.
Altogether, the tone of the report is that the Swiss government and its institutions need to get into gear, “Switzerland now has to take the next step in the development of DLT, morphing from the much-vaunted “Crypto Valley” into a fully-fledged DLT nation.”