The Swiss National Bank (SNB) is set to introduce a central bank digital currency (CBDC) for wholesale payments on the country’s SIX Digital Exchange, marking Switzerland’s entry into the expanding field of innovation in digital currency.
The Swiss National Bank (SNB) has made a breakthrough announcement with its decision to start issuing a CBDC specifically for wholesale payments on the SIX Digital Exchange in Switzerland, according to its chairman Thomas Jordan.
The move signals a move towards digital financial systems and places Switzerland alongside other countries such as China, India and Australia that are similarly advancing their CBDC technology.
Speaking to the Point Zero Forum in Zurich, Jordan stressed that this digital currency initiative is more than just a trial. The central bank’s foray into digital currency will create a true monetary equivalent of bank reserves in an effort to test real transactions between market participants.
The experimental Swiss CBDC is intended for use in the financial sector, making Switzerland part of the growing list of 18 countries currently operating pilot CBDC programs, according to the Atlantic Council’s CBDC Tracker.
CBDCs, like stablecoins, are digital tokens whose value is linked to a sovereign currency, in this case, the Swiss franc. However, these tokens differ in that they are issued by the government or central bank, rather than by private companies on public networks.
The main purpose of a wholesale CBDC, like this one, is to facilitate large-scale transactions between financial institutions, such as bank-to-bank transfers. Jordan’s announcement thus aligns Switzerland with Saudi Arabia among the countries currently testing a wholesale CBDC.
On CBDCs facing retail, Jordan expressed a sense of caution from the Swiss central bank. He did not rule out the possibility of introducing retail CBDCs in the future, but maintained a conservative stance for now.
In 2021, Thomas Moser, an alternate member of the SNB’s Executive Board, expressed his preference for a CBDC over a Swiss franc-denominated stablecoin, given the lack of counterparty risk in the former.
Before the creation of the SIX Digital Exchange in 2021, the SNB had partnered in 2019 with the SIX Group to develop a proof of concept for a digital currency. Recent statements from Jordan suggest that the pilot program for the wholesale CBDC will soon be launched and will continue for a fixed period of time.