Swiss National Bank Rejects Public Digital Currency

The Swiss National Bank (SNB) has declined to pursue the introduction of a retail Central Bank Digital Currency (CBDC), citing concerns over potential risks to financial stability.

SNB Chairman Thomas Jordan emphasised the current efficiency of the market and the innovative payment methods offered by the private sector, suggesting that there is no immediate necessity for a public CBDC.

Retail CBDCs Could Disrupt Monetary System

Jordan cautioned that the introduction of retail CBDCs could disrupt the established monetary system and the relationship between central and commercial banks, potentially resulting in negative impacts on financial stability.

Disadvantages Outweigh Benefits

The SNB believes that the disadvantages of implementing retail CBDCs outweigh the potential benefits.Despite its reservations about retail CBDCs, the SNB is making progress in payment technology.

In November 2023, it upgraded its Swiss Interbank Clearing (SIC) system to prepare for the launch of instant payments for retail customers by the upcoming summer.

The upgraded system will also support new payment instruments and programmable payments, demonstrating the bank's commitment to innovation.

Positive Outlook on Wholesale CBDCs

In contrast to its stance on retail CBDCs, the SNB holds a positive view on wholesale CBDCs, designed 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, with successful settlements already achieved.

However, Jordan acknowledged several challenges that must be addressed before wholesale CBDCs can be fully implemented, including issues related to the management of digital central bank funds and access for financial institutions.

The SNB is also considering the use of wholesale CBDCs for monetary policy operations, indicating a cautious yet progressive approach to digital currency innovation.

While cautious about the potential risks associated with retail CBDCs, the SNB recognises the benefits of wholesale CBDCs in streamlining financial transactions, reflecting a careful approach to digital currency integration in Switzerland's financial landscape.