The Swiss National Bank (SNB) will issue a central bank digital currency (CBDC) as part of a pilot project on the SIX Digital Exchange (SDX). The digital currency aims to showcase the advantages and disadvantages of a CBDC for interbank payment settlement.
Central bank digital currencies (CBDCs) are digital money issued by a central bank. CBDCs are intended to enhance the efficiency, security, and transparency of payment systems among major banks, enabling faster settlement, reduced counterparty risk, and improved interoperability between financial institutions at a national or international level. The Swiss National Bank, in particular, has been at the forefront of researching these digital central bank currencies, as highlighted by Thomas Moser, Alternate Member of the SNB's Governing Board, in an interview with CVJ.CH. Now, the SNB aims to initiate the first project involving "real digital money."
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SNB: CBDCs more suitable for commercial banks
The CBDC pilot project is to be launched this year, SNB President Thomas Jordan revealed at the Point Zero Forum in Zurich. This is not just an experiment, he said, but real money corresponding to bank reserves. The goal, he said, is to test real transactions with market participants. The pilot project will begin "soon" and is initially intended for a limited period, he said. The project will take place on the digital exchange of the Swiss stock exchange SIX.
The use of the CBDC will once again be limited to commercial banks, a concept known as "Wholesale CBDC." While this type of digital currency also poses certain risks, the benefits are considered more manageable. A retail CBDC, on the other hand, poses too many risks for now, according to the SNB President.
"We do not exclude the introduction of a retail CBDC, but at the moment, we are still somewhat cautious." - Thomas Jordan, President of the Swiss National Bank (SNB)
Continuation of long-standing testing efforts
The pilot project is not the SNB's first examination of a CBDC. As early as 2019, the Swiss currency guardian expressed its views on digital central bank money and collaborated with the Swiss Stock Exchange (SIX) to explore the use of a digital franc within the national financial system. Later, as part of the Helvetia project, the SNB experimented with security transactions settled through a CBDC. The Jura project further expanded the experimentation to include cross-border transactions.
The Bank for International Settlements (BIS), through its Innovation Hub, supports central banks' experiments with public goods in the technological field. The "central bank of central banks" has been involved in various CBDC projects of the SNB. The latest prototype (Project Tourbillon), which started last winter, explores a digital central bank currency with integrated data privacy.
