The Swiss National Bank Pushes Ahead With Its Wholesale CBDC Strategy

Announced at a Zurich conference this Monday, the Swiss National Bank (SNB) plans to issue a Central Bank Digital Currency (CBDC) targeting financial institutions. This pivotal pilot project will leverage Switzerland’s SIX digital exchange, underscoring the country’s cutting-edge approach to the digital financial sector.

Distinguishing Between Wholesale and Retail CBDCs

Understanding the significance of this decision requires distinguishing between wholesale and retail CBDCs. The SNB plans to introduce the former, exclusively for financial institutions to conduct interbank transactions. In contrast, retail CBDCs are developed for public use.

SNB’s Chairman, Thomas Jordan, underscored the seriousness of the venture, stating:

“This isn’t a mere experiment. The currency will be equivalent to real bank reserves, aiming to test real transactions with market participants.” His words, as reported by Reuters at the Point Zero Forum, indicate the potential magnitude of this project.

Although committing to the pilot project, Jordan remains open-minded about its future. He didn’t disregard the possibility of discontinuing the project or introducing retail CBDCs later, signifying a prudent approach to these novel monetary technologies.

Switzerland’s Unique Stance in the Financial Landscape

Switzerland has consistently carved out its own path in a financial world that never stands still. Unlike its neighbors, Switzerland doesn’t participate in the EU or use the Euro as its currency. Instead, it proudly uses its own – the Swiss Franc.

The country has contemplated introducing a digital currency for a considerable period. In early 2021, terms such as “e-franc” and “digital Swiss franc” were patented, indicating Switzerland’s forward-thinking attitude toward the financial realm. The preference for a wholesale-only CBDC was made clear by the Swiss financial elite as early as 2020.

The Rationale Behind Switzerland’s Unique Wholesale CBDC Path

Switzerland’s decision to focus on a wholesale CBDC contrasts with the UK and EU retail-driven approach. Yet, this decision aligns with the nation’s reputation as a global financial services hub.

Nevertheless, the contribution of financial and insurance services to the country’s GDP has steadily declined. Accounting for 9% last year, the share has dropped from 10% in 2011.

Intriguingly, the European Central Bank (ECB) backed down earlier this year from its plan to make its digital euro programmable, suggesting a contrasting approach to digital currencies compared to Switzerland.

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