The Swiss National Bank Considers Launching a CBDC
- The Swiss National Bank believes retail CBDC is more difficult to regulate and poses huge risks to the financial system.
- Research claims that about 90% of central banks globally are considering launching a CBDC.
- Wholesale CBDCs are meant for interbank transactions, while retail CBDCs are designed for retail purposes.
The chairman of the Swiss National Bank (SNB), Thomas Jordan, announced on Monday that the central bank will launch a wholesale central bank digital currency (CBDC) on Switzerland’s SIX Digital Exchange as part of a pilot.
Jordan said at a conference in Zurich,
This is not just an experiment; it will be real money equivalent to bank reserves, and the objective is to test real transactions with market participants.
As per a Reuters report, Jordan revealed that the pilot project would only be for a short period of time but didn’t provide an exact date for the commencement of the project other than “soon.”
The SNB chair also revealed that the institution has long been wary of using public, or retail, CBDCs as opposed to wholesale CBDCs, which use tokenized securities.
Jordan explained that the use of retail CBDCs was more challenging to regulate, adding that he was also worried about the possible consequences they could have for the financial system.
However, Jordan did not dismiss the possibility of a retail-focused CBDC. He said,
We do not exclude that we will never introduce retail [CBDCs]. But nevertheless, we are a little bit prudent at the moment.
CBDCs and stablecoins are both digital tokens whose value is tied to the value of a national currency. However, CBDCs are operated by national governments or central banks rather than being issued by private corporations.
Switzerland has now joined the list of countries that have started testing CBDCs. Other countries include India, China, and Australia. Interestingly, research states that 90% of central banks globally are exploring the possibility of launching a CBDC.
There are two main types of CBDCs: retail and wholesale. Retail CBDC can be used by the private sector, non-financial clients, and businesses, whereas wholesale CBDC is solely designed for specific financial institutions.
Wholesale CBDC is meant to be used in interbank transfers and other associated wholesale operations. However, retail CBDC is mainly designed for retail transactions.
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