Whether or not a banking licence is required, stable coin issuers must abide by certain regulations just like any other financial market participant. These range from investor and data protection to rules on combating money laundering and terrorism financing. As you see, ladies and gentlemen, stable coins present many regulatory challenges, which in turn require close cooperation between the various authorities. This is particularly true of cross-border projects like Libra. In addition to the regulatory issues, there is the question of whether stable coins might influence the effectiveness of monetary policy. If Swiss franc stable coins were to proliferate in Switzerland, this would have no immediate impact on the effectiveness of our monetary policy. In such a scenario, the Swiss franc would remain the relevant currency. The stable coins pegged to Swiss francs would simply be another Swiss franc-denominated form of money alongside bank deposits and cash. As long as prices, wages and loans are set in Swiss francs, the SNB can influence incentives for savers and borrowers via its monetary policy and thus ensure price stability over the medium term. However, if stable coins pegged to foreign currencies were to establish themselves in Switzerland, the effectiveness of our monetary policy could be impaired. How close stable coins will get to good money and what additional benefits they will offer versus traditional types of money remains to be seen. What matters is that the various book and token money providers operate under identical competitive and regulatory conditions.

Such tokens could be used in payment transactions between financial market participants in the same way as sight deposits are today, and could ultimately result in efficiency gains for financial market infrastructures. Taking Switzerland as an example, this would mean that the SNB would make Swiss franc tokens available to financial market participants. The financial industry and a number of central banks are currently assessing whether, and to what extent, tokens can bring efficiency gains. For instance, experiments and tests are being conducted with digital tokens in the areas of securities trading, settlement and management. It is hoped that ‘security tokens’ could be transferred between counterparties in near real time, resulting in more efficient management of securities. In a ‘Swiss franc tokens for financial market participants’ scenario it would be possible to exchange security tokens for token money on a delivery-versus-payment basis. In-depth analysis will be required to determine whether security tokens can indeed bring the desired efficiency gains. Besides the technical hurdles that would to be overcome, steps must also be taken to ensure that applicable legal and regulatory requirements can be met. Moreover, efficiency gains must never be allowed to compromise the security of technical systems. It is too soon to answer the question of how best to configure money flows in trading with security tokens. In certain situations, security tokens could be traded and settled just as efficiently if the transfer of funds continued to flow directly via the sight deposits at the  Page 6/7  central bank.