The decision to prioritize wholesale CBDCs, which involve tokenized securities, shows the SNB’s commitment to thoroughly assess and manage any associated risks before considering the introduction of retail CBDCs.
The Swiss National Bank (SNB) is set to create a digital currency known as the wholesale central bank digital currency (wCBDC). According to a Reuters report, the announcement was made by SNB director Thomas Jordan during a Point Zero conference in Zurich on June 26.
This announcement comes at a time when central banks around the world are looking at digital versions of their currencies to avoid leaving digital payments in the hands of the private sector.
wCBDC by the Swiss National Bank
The wCBDC will be issued on the digital exchange SIX, the largest stock exchange in Switzerland, as part of a pilot program. Jordan said the project would start soon and is scheduled to run for a limited time.
The goal is to understand how the wCBDC performs in practical transactions with market participants. “This is not just an experiment. It will be real money equivalent to bank reserves, and the goal is to test real transactions with market participants,” the SNB chairman said.
The SNB’s move reflects a growing trend among central banks to explore and develop digital currencies. These virtual assets are gaining popularity due to their potential to streamline financial processes and improve cross-border payments. Switzerland, known for its financial innovation, aims to harness this technology to improve its financial economy.
The Swiss bank started the wCBDC campaign last year. In January, the bank announced the integration of the digital asset into five commercial banks, including Citi, Credit Suisse, and Goldman Sachs, as part of the second phase of its Helvetia Project.
SNB incorporated the wCBDC into the banks’ existing back-office systems and processes. Aside from Switzerland, other countries like the UK, Russia, Japan, India, and even China are exploring the use of central bank-issued virtual assets for cross-border payments.
The International Monetary Fund (IMF) has also recently published a plan for the creation of CBDCs in compliance with regulatory requirements. The IMF plans to develop a global platform where users can interact with CBDCs.
SNB Remains Cautious of Public CBDCs
Despite its plans to explore wCBDCs, SNB has remained cautious when it comes to implementing public or retail central bank digital currencies (CBDCs), in contrast to its involvement with wholesale CBDCs.
The SNB Chairman has expressed concern regarding the potential risks that retail CBDCs could present to the financial system, mainly due to the challenges associated with control and supervision. Jordan acknowledged that the bank does not completely rule out the future introduction of retail CBDCs.
However, he emphasized the current prudence exercised by the bank in addressing this area of digital currency. “We do not exclude that we will never introduce retail [CBDCs], but nevertheless, we are a bit cautious at the moment,” he said.
The decision to prioritize wholesale CBDCs, which involve tokenized securities, shows the SNB’s commitment to thoroughly assess and manage any associated risks before considering the introduction of retail CBDCs.
By focusing on this approach, the SNB aims to gain a comprehensive understanding of the potential benefits and challenges of digital currencies while safeguarding the stability of Switzerland’s financial system.
By Audy Castaneda
