Swiss central bank sees no need for public CBDC as risks outweign benefits

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According to the Chair of the Swiss National Bank, Thomas Jordan, it’s not essential for the central bank to issue a digital currency for the general public at this time. Instead, he advocates for exploring interbank digital currency trials as an alternative.

According to Reuters and the Swiss National Bank’s president, Thomas Jordan, it is unlikely that Switzerland will launch a central bank digital currency (CBDC) soon. The risks related to this technology currently seem greater than the advantages, as reported by Reuters.

At a function in Zurich, Jordan remarked that consumers and businesses currently have access to numerous effective and inventive payment methods offered by the private sector. He further pointed out that introducing a retail central bank digital currency (CBDC) could fundamentally alter the current monetary system.

A retail central bank digital currency (CBDC) might significantly shift the existing monetary framework, redefining the functions of central banks and commercial banks, potentially causing extensive modifications throughout the financial sector.

Thomas Jordan

To date, the Swiss National Bank (SNB) has conducted several experiments with wholesale Central Bank Digital Currencies (CBDC). These trials allow commercial banks such as UBS and Zuercher Kantonal Bank to execute transactions directly using the SNB’s funds. This streamlines and lowers the cost of payment processing.

Despite progress, there are unanswered questions since the technology is not fully developed yet. Jordan underscored the importance of tackling challenges like whether Swiss franc digital central bank funds can be safely held overnight, how to compensate, and identifying suitable financial institutions.

The SNB’s careful approach towards Central Bank Digital Currencies (CBDCs) matches the warnings voiced by other financial regulatory bodies. Notably, in mid-March, Sweden’s central bank, Riksbank, published a research note expressing concerns about potential risks related to CBDCs, specifically mentioning the challenge of keeping data synchronized during offline transactions.

The Swedish Riksbank emphasized the need for coordinating offline transactions with online balances, addressing potential liquidity risks arising from hidden digital wallets and intermediaries linking offline and online wallets.

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2024-04-09 13:32