Recently, there was turmoil in the stablecoin industry. This was after the popular DeFi platform, Terra, collapsed. Also, its stablecoin, the USD crashed, and several investors lost millions of dollars.
Following the news, a Swiss National Bank (SNB) executive has commented on the matter. The executive, Thomas Moser, believes that regulators would favor centralized stablecoins over decentralized ones.
Deputy Head at the SNB, Thomas Moser, discussed this with Aaron Wood, Cointelegraph’s Editor, recently at the concluded European Blockchain Convention 2022.
They talked about the regulation of CBDCs and stablecoins. According to Moser, both stablecoins and CBDC can coexist. What both currencies need is proper regulation.
Also, the executive noted that CBDC would have basic functions. As a result, issuers of private stablecoins can add more services to them. This would meet the needs of most retail consumers.
Furthermore, Moser also talked about the fall of Terra’s UST and its impacts on regulation. The executive noted that the fall of the decentralized system could change the tides for DeFi.
This is because regulators are now cautious about the sector since the huge financial downturn. Additionally, he noted that regulators would likely favor centralized stablecoins more than decentralized.
“I fear that regulators would see all decentralized stablecoins same way they look at the UST. However, not all stablecoins are like the UST,” he added.
Moser: Regulation Of Stablecoins Would Take Time
Moreover, Moser believes the issue of regulation of stablecoins might take time. He gave the internet regulation in the 1900s as a case study. Then, regulators had to make new rules and do away with existing telephone rules.
According to Moser, the present financial regulations guiding the financial sector are harmful to crypto. If such rules are taken to the crypto sector, DeFi will go into oblivion. Explaining his statement, he added that:
“Taking the existing financial regulation will destroy the DeFi sector. Thus is because only centralized entities would be allowed to operate. The current regulations are for centralized platforms. In the case of DeFi, there is no central entity to hold accountable for anything. This sector needs a different set of regulations.”
Besides, the central bank of Switzerland has taken a giant stride in CBDC development. Like China, the country had carried out pilot testing for its CBDC. Earlier in January, the country tested its wholesale CBDC.
Later in the same month, the SNB released a report of the trials. The result showed the risks of issuing a CBDC outweigh the benefits. As a result, the country paused its CBDC development.