The Swiss National Bank has warned that stablecoins could weaken monetary policy, raising the disturbing possibility that the price of money might someday become slightly harder for a small unelected committee to centrally dictate.
Modern economies are, of course, built on free markets, where millions of buyers and sellers supposedly discover prices through voluntary exchange.
Except for money.
That price is important enough to be decided in a meeting.
Central banks set benchmark interest rates and deliberately transmit those decisions through banks, mortgages, corporate borrowing, asset prices, employment and spending until people behave differently.
Economists call this “monetary-policy transmission,” because “changing the price of money until the population responds correctly” apparently sounded unnecessarily authoritarian.
Stablecoins could complicate that system by moving money outside portions of the traditional banking network, potentially weakening central banks’ ability to push their chosen interest rate through the broader economy.
Central bankers consider this a threat to monetary stability.
Free-market purists might recognize it as the horrifying possibility that markets could begin interfering with central planning.
Defenders note that central banks manipulate interest rates for noble purposes such as controlling inflation, supporting employment and repairing economic problems frequently influenced by previous interest-rate manipulation.
The distinction is important.
When markets determine prices, it is capitalism.
When a small unelected committee determines the benchmark price underlying virtually every other financial asset, it is macroeconomic policy.
Fortunately, the global economy remains committed to free markets.
Just not for the money that everything, everywhere is priced in.
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