The Swiss National Bank (SNB) plans to initiate a pilot program as it joins the increasing number of banking regulators investigating the potential of a central bank digital currency (CBDC). SNB Chairman Thomas Jordan announced this development during the Point Zero Forum in Zurich.

The central bank’s intention is to conduct an experiment focused on a wholesale CBDC rather than a retail version. This approach indicates the possibility of further exploration.

In contrast to a basic experiment, this project aims to generate real currency that is equivalent to bank reserves. The objective is to assess the effectiveness of these funds through real transactions involving participants in the market.

Currently, Switzerland is closely monitoring the European Central Bank’s (ECB) digital euro pilot program. The initiative has the potential to influence the trajectory of Switzerland’s retail Central Bank Digital Currency (CBDC). 

The new CBDC pilot in Switzerland will take place on SIX Digital Exchange. It is an early platform that has obtained operational licensing from Swiss regulators. 

Swiss National Bank
Swiss National Bank

SNB Dives Into Digital Currencies

Experts argue that this decision establishes a precedent for wholesale CBDC settlements on regulated financial market infrastructure. This move marks the first occurrence of its kind worldwide. However, a thorough examination of the technical specifics indicates that the pilot will rely on commercial bank funds rather than a CBDC in its strictest interpretation.

SNB, in its upcoming project which will start soon, is venturing into the world of digital currency. This project is time-bound and holds great significance for SNB.

Final Words

Numerous central banks worldwide are examining digital versions of their respective currencies. They are doing so to prevent complete control of digital payments by the private sector. This hunt is especially motivated with the decline in cash usage, further accelerated by the COVID-19 pandemic.

Nevertheless, SNB is cautious about the use of public CBDCs, in contrast to wholesale CBDCs that employ tokenized securities. Chairman Jordan has expressed concerns regarding the potential risks that retail CBDCs could pose to the financial system. He also noted the more challenging control they present over their usage.