Switzerland is entering the world of digital currency innovation as the Swiss National Bank (SNB) prepares to launch a CBDC for wholesale payments on the SIX Digital Exchange.
Thomas Jordan, the chairman of the SNB, announced that the decision to issue a CBDC specifically for wholesale payments on the SIX Digital Exchange is historic.
It signifies Switzerland’s involvement in the development of CBDC technology, joining countries like China, India, and Australia in the movement towards digital financial systems.
Speaking at the Point Zero Forum in Zurich, Jordan emphasized that this digital currency initiative is not just a test but a significant step towards practical use.
The central bank aims to enter the digital currency market to provide bank reserves with a tangible monetary equivalent that market participants can use for real transactions.
According to the CBDC Tracker by the Atlantic Council, Switzerland designed the experimental Swiss CBDC for use within the banking industry. This places Switzerland among the 18 nations that have initiated CBDC pilot programs.
CBDCs are digital tokens that derive their value from a sovereign currency, in this case, the Swiss Franc, similar to stablecoins. However, unlike private businesses issuing tokens on open networks, the government or central bank issues CBDCs.
The role of CBDCs in facilitating bank-to-bank transfers
The primary purpose of a wholesale CBDC like the Swiss one is to facilitate bank-to-bank transfers and large-scale transactions between financial institutions.
Jordan’s announcement aligns Switzerland with nations like Saudi Arabia exploring wholesale CBDCs. While Jordan did not rule out the possibility of introducing retail CBDCs in the future, he expressed caution regarding them.
Thomas Moser, an Alternate Member of the SNB’s Governing Board, stated a preference for CBDCs over stablecoins pegged to the Swiss Franc due to the former’s lack of counterparty risk.
In 2019, the SNB and the SIX Group collaborated on a proof-of-concept for a digital currency, leading to the launch of the SIX Digital Exchange in 2021. Jordan’s recent announcement indicates that the pilot program for the wholesale CBDC will commence soon and operate for a specified duration.
