The Swiss National Bank (SNB) has voiced reservations regarding the implementation of retail Central Bank Digital Currencies (CBDCs), citing concerns over potential destabilisation of the financial system.
Chairman Thomas Jordan emphasised that, given the current efficiency and innovative payment methods offered by the private sector, there’s no imperative for a public CBDC.
Jordan cautioned that introducing retail CBDCs could disrupt the established monetary system and the dynamics between central and commercial banks, which may pose risks to financial stability. In his view, the drawbacks of such digital currencies seem to outweigh their benefits.
Nevertheless, despite these reservations, the SNB is actively advancing in payment technology. It recently upgraded its Swiss Interbank Clearing (SIC) system to enable instant payments for retail customers by the upcoming summer. The system’s enhancements also include support for new payment instruments and programmable payments, underscoring the bank’s commitment to innovation.
By contrast, the SNB maintains a positive outlook on wholesale CBDCs designed for transactions between commercial banks and the central bank. Through Project Helvetia III, the SNB is testing the use of wholesale CBDCs in financial transactions, with successful settlements already achieved. This approach demonstrates the potential for enhancing transaction efficiency and security.
However, Jordan acknowledged several challenges that need addressing before wholesale CBDCs can be fully implemented. These challenges encompass issues related to managing digital central bank funds and ensuring access for financial institutions.
Furthermore, the SNB is exploring the possibility of using wholesale CBDCs for monetary policy operations, indicating a cautious yet progressive approach toward digital currency innovation.
Overall, while the SNB remains cautious about the potential risks associated with retail CBDCs and their impact on financial stability, it recognizes the potential benefits of wholesale CBDCs in optimising financial transactions. This stance reflects a balanced approach to integrating digital currency innovations into Switzerland’s financial landscape.