The Swiss National Bank is Concerned of Public Digital Currency but Receptive to Wholesale CBDC Blockchain

Retail Central Bank Digital Currencies (CBDCs) have the Swiss National Bank (SNB) worried that they might cause financial system instability.

Given the present market’s efficiency and innovation in private sector payment systems, SNB Chairman Thomas Jordan said that a governmental CBDC is unnecessary.

Jordan brought attention to the fact that retail CBDCs have the power to shake up the banking system and the connection between central and commercial banks, which might have detrimental effects on the stability of the financial system.

In his opinion, the potential drawbacks of implementing such digital currencies exceed any potential positives.

The SNB is still making strides in payment innovation, notwithstanding these concerns. In November 2023, it made upgrades to its Swiss Interbank Clearing (SIC) system in order to provide immediate payments to retail clients by the summer of 2024.

Another way the system demonstrates the bank’s dedication to innovation is by supporting new payment instruments and programmable payments.

While the SNB has reservations about CBDCs used for retail transactions, it has a more favorable attitude towards wholesale CBDCs used for transactions between commercial banks and the central bank.

The SNB is trialing the use of wholesale CBDCs in monetary transactions via Project Helvetia III, which has resulted in successful settlements so far.

It is clear that this method has the ability to make transactions safer and more efficient. Full implementation of wholesale CBDCs is contingent upon resolving a number of issues, as pointed out by Jordan.

Problems with access and the administration of digital funds held by central banks are among them. The SNB is taking a cautious but forward-thinking approach to digital currency innovation, as they are contemplating the use of wholesale CBDC for monetary policy operations.

Despite the SNB’s concerns about retail CBDCs’ impact on financial stability, the central bank acknowledges the advantages of wholesale CBDCs in simplifying financial transactions.

This demonstrates that Switzerland’s financial system is taking its time to incorporate new forms of digital funds.

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