Innovative Approach to Cryptocurrencies – Will Switzerland Lead the Evolution of Digital Money?

Central Bank Digital Currency (CBDC) – Will Switzerland Decide to Implement It?

The Chairman of the Swiss National Bank (SNB), Thomas Jordan, has expressed his opinion on the potential introduction of a retail Central Bank Digital Currency (CBDC) in Switzerland. What are the main arguments and challenges related to this issue?

Risks and Benefits of a Retail CBDC

According to Thomas Jordan, the risks associated with introducing a retail Central Bank Digital Currency for the society outweigh the potential benefits. He pointed out the existence of various payment instruments offered by the private sector, available to consumers and businesses, which in Jordan’s opinion do not justify the need for a retail CBDC. On the other hand, a retail CBDC could facilitate secure and efficient settlement of secured assets, which would be a significant advantage for financial institutions.

Conditions for Implementing a Retail CBDC

Before deciding on the potential introduction of a retail Central Bank Digital Currency for financial institutions in Switzerland, the central bank must address several issues. It is necessary to determine if digital Swiss francs can be stored overnight, what interest rates would apply to them, and which financial institutions would have access to the retail CBDC.

Pilot Projects of a Retail CBDC

In November 2023, the Swiss National Bank announced plans to conduct a pilot project of a retail Central Bank Digital Currency in collaboration with six other financial institutions from Switzerland, Germany, and the digital exchange SIX. A previous pilot project last year yielded positive results, including the successful settlement of bond issuance transactions from cantons and cities using a retail CBDC.

Global Trends in Retail CBDC

Regardless of the decisions made in Switzerland, global financial institutions are also exploring the topic of retail Central Bank Digital Currency. Swift announced the successful testing of the second phase of their retail CBDC interaction solution, during which the Swift converter enabled financial institutions to conduct various transactions using CBDC and other digital tokens. Meanwhile, the Hong Kong central bank has initiated a project to introduce a retail CBDC, focusing on supporting new financial market infrastructure for the development of tokenization in Hong Kong.

The decision to implement a retail CBDC in Switzerland remains open, however, both the benefits and challenges related to this issue are being widely analyzed by financial institutions at national and international levels.