The downside is that you cannot control the monetary policy of your of own country. You cannot pump money according to the economic situation. Look at the eurozone, for example, Germany wants to increase rates -hence increase the value of Euro- whereas Greece is still struggling. Leaving your currency to somebody else’s decisions may not be a good idea.
Some reading: - https://www.economist.com/blogs/economist-explains/2015/01/e... - https://www.reuters.com/article/us-swiss-franc-shock/three-y...
Decentralizing control by definition gives power to all of the nodes in the network, requiring their buy-in to conduct any type of "monetary policy" by changing the source code and rolling out an upgraded application.
Any changes that could increase the hash rate, increase the max number of tokens, "destroy" transactions, rollback to a certain state, etc. would require miner cooperation. Whereas right now central banks can just "create" liquidity by tweaking monetary policy without needing the banks and populace to approve and agree to these changes.
Assuming you implemented a POW blockchain-based, decentralized (anyone can download and run a node), virtual currency, this would remove control over the supply and generation of the currency from the Swiss National Bank (fiscal and monetary policy experts) and give it to...Chinese cryptocurrency miners + whatever group of developers Switzerland decides to put in charge of maintaining and upgrading the swiss blockchain?
What your friend is referring to is actually an idealized economic concept, the "Stablecoin" - one that is pegged to the exact right basket of goods, services, and semi-finished industrial products that it experiences little to no inflation/deflation and can be counted on as a store of value.
All countries are or should be trying to create a Stablecoin relative to their own economies - allowing private citizens to assume their $5,000 USD will be able to buy roughly the same amount of goods and services in, say 6 months.
All this to say...the Swiss have already created a Stablecoin for their economy...the franc. There is no reason to break up and decentralize an organization that is competently managing a currency. It only makes sense in cases (such as Venezuela) where the central authority is doing a terrible job of managing their currency, and is nowhere near achieving "Stablecoin" status. Or for markets where there is no accepted "Stablecoin" because they are illegal/no enforcement mechanism to honor the transaction (e.g. you can't bring a lawsuit in a US court against a drug dealer if he takes your USD and sells you bad drugs).