Swiss Bank Cautious on Digital Currency for Public, Open to Wholesale CBDC
SNB rejects public digital currency due to risks, explores wholesale CBDC options
The Swiss National Bank (SNB) has expressed concerns about retail Central Bank Digital Currencies (CBDCs), suggesting they might destabilize the financial system.
SNB Chairman Thomas Jordan mentioned there is no need for a public CBDC due to the current market's efficiency and innovation in payment methods offered by the private sector.
Jordan highlighted that retail CBDCs could disrupt the monetary system and the relationship between central and commercial banks, potentially leading to negative impacts on financial stability.
He believes that the disadvantages of introducing such digital currencies outweigh their benefits.
Despite these reservations, the SNB is advancing in payment technology.
It upgraded its Swiss Interbank Clearing (SIC) system in November 2023, preparing to launch instant payments for retail customers by the upcoming summer.
The system will also support new payment instruments and programmable payments, showing the bank's commitment to innovation.
In contrast to its view on retail CBDCs, the SNB is positive about wholesale CBDCs, which are meant for transactions between commercial banks and the central bank.
Through Project Helvetia III, the SNB is testing the use of wholesale CBDCs in financial transactions, already achieving successful settlements.
This approach shows the potential for improving the efficiency and security of transactions.
However, Jordan noted that several challenges must be addressed before fully implementing wholesale CBDCs.
These include issues related to the management of digital central bank funds and access for financial institutions.
The SNB is also considering using wholesale CBDC for monetary policy operations, indicating a cautious but progressive stance towards digital currency innovation.
Overall, while the SNB is wary of the potential risks associated with retail CBDCs to financial stability, it recognizes the benefits of wholesale CBDCs in streamlining financial transactions.
This reflects a careful approach to integrating digital currency innovations within Switzerland's financial landscape.
