Despite pilot, Swiss National Bank has no plans to launch CBDC

Though the Swiss National Bank is set to pilot central bank digital currencies, or CBDCs, amid a changing financial ecosystem, it doesn’t necessarily have plans to launch one.

The pilot is meant to test a wholesale CBDC for “a limited time” to test transactions with market participants on the SIX Digital Exchange, a spokesperson told Blockworks.

The central bank sees signs in Switzerland of the development of a new financial ecosystem where transactions take place with tokenized securities and tokenized money — an environment set to make financial markets more efficient.

The SIX Digital Exchange launched in November 2021 when parent company SIX issued a tokenized bond that marked “the beginning of a new era,” Thomas Zeeb, SIX’s global head of exchanges, said in a statement at the time.

UBS issued a digital 375 million Swiss franc-denominated, three-year bond on the SIX Digital Exchange about a year later — becoming the first such bond by a banking institution to be listed, traded and settled on a regulated digital exchange.

“For the SNB, the development of a tokenized ecosystem raises an important question: How can we organize settlement of financial transactions in central bank money in such a tokenized financial system?” the Swiss National Bank spokesperson said. “Settlement in central bank money eliminates credit risk. This is important for financial stability.”

Confirmation of the CBDC pilot program comes after the bank said in a March 30 report that it had examined integrated settlements — in which tokenized money and other assets exist on the same distributed ledger — using a Swiss franc wholesale CBDC. It noted its intention at the time to further explore operations needed for the Swiss National Bank to issue one if necessary.

Another test involved integrated settlements using private Swiss franc token money that is backed one-to-one by sight deposits at the bank, the report said.

The Swiss National Bank will report on the CBDC pilot and its participants “in due course,” a spokesperson said Tuesday.

“At this point, this work is not intended as a declaration of the [Swiss National Bank]’s intent to issue a wholesale CBDC,” the representative added in an email. “Rather, the point is to act prudently and proactively so that we can continue to fulfill our mandate in the future.”

Wholesale versus retail CBDCs

A wholesale CBDC corresponds to a tokenized form of sight deposits held by commercial banks at the central bank, the central bank said in its March report.

A retail CBDC would be available to the general public —and would “essentially be tokenized cash,” according to the bank.

“We do not weigh against each other the advantages of retail and wholesale CBDC,” a bank spokesperson said. “The motivations and implications of retail and wholesale differ.”

For cashless payments today, commercial banks and financial institutions can have accounts at the central bank in central bank money and, in turn, offer banking services for their customers in private money.

A wholesale CBDC would leave these roles unchanged, but transfer the model to a tokenized world, the spokesperson noted.

“Clearly, there can be policy implications from wholesale CBDC depending on its design, and we want to evaluate these carefully,” the representative said. “However, they would probably be less fundamental compared to those of a retail CBDC.”

The Swiss National Bank’s considerations come as roughly 110 countries are in the midst of studying CBDCs or getting set to implement them, according to International Monetary Fund executive Kristalina Georgieva. While retail CBDCs — ones that can be held and used by individuals — could pose risks not yet known, Georgiva said in May, wholesale CBDCs can likely be implemented “with fairly little space for undesirable surprises.”

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