Global: Swiss National Bank Chairman Cautions Against Retail CBDC

Thomas Jordan, Chairman of the Swiss National Bank (SNB), voiced concerns on Monday (April 8) regarding the risks associated with introducing a central bank digital currency (CBDC) to the general public, stating that they would outweigh potential benefits.

Addressing an event in Zurich, Jordan highlighted that consumers and businesses already have access to a diverse array of payment instruments provided by the private sector, rendering a retail CBDC unnecessary, as reported by Reuters.

Conversely, Jordan suggested that a wholesale CBDC could serve to facilitate the secure and efficient settlement of tokenized assets, offering potential advantages, according to the report.

However, before contemplating the introduction of CBDCs for financial institutions on a broader scale in Switzerland, the central bank must address key considerations. These include determining whether digital Swiss francs could be held overnight, methods for remuneration, and which financial institutions would be granted access, Jordan elaborated, as reported.

In a pilot project conducted by the SNB last year, known as “Project Helvetia III,” the central bank identified benefits associated with utilizing a wholesale CBDC for transaction settlements. The pilot successfully settled four bond issuances from cantons and cities using wholesale CBDC.

In November 2023, as preparations were made to pilot a wholesale digital franc in December, Jordan announced that the SNB, alongside six other financial institutions from Switzerland, Germany, and Swiss digital exchange SIX, would issue the CBDC on a blockchain. The aim was to enable transactions to be settled with tokenized assets using real wholesale CBDC.

“This is not merely an experiment; it will represent actual money equivalent to bank reserves, and the objective is to conduct genuine transactions with market participants,” Jordan emphasized when initially unveiling the pilot in June 2023.

In other recent developments concerning CBDCs, Swift announced in March that the second phase of industrywide sandbox testing on its CBDC interlinking solution demonstrated that Swift’s connector could facilitate a wide range of transactions using CBDCs and other digital tokens.

Additionally, in March, Hong Kong’s central bank initiated a wholesale CBDC project, with the goal of bolstering a new financial market infrastructure to support the development of the Hong Kong tokenization market, with an initial focus on tokenized deposits.