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Switzerland’s Central Bank Plans December CBDC Pilot

Swiss National Bank

The Swiss National Bank (SNB) is set to begin piloting a wholesale digital franc next month.

The bank, along with six other lenders from Switzerland, Germany and Swiss digital exchange SIX, will issue the central bank digital currency (CBDC) on a blockchain, the SNB announced Thursday (Nov. 2).

“With this pilot project, we are now, for the first time, making it possible to securely and efficiently settle transactions with tokenized assets on a regulated and productive DLT platform using real wholesale CBDC,” Thomas Jordan, chairman of the SNB’s governing board, said in a news release.

“We are proud of our internationally pioneering role in this area as we carry out this innovative project together with SIX and the participating banks,” he added. 

The SNB had announced the pilot, set to begin Dec. 1, in June.

“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,” Jordan said at the time.

The bank in 2021 had said it sees no need for a digital franc, according Carlos Lenz, its chief economist, in comments to a Swiss newspaper.

“The current payment system works well,” he said, “There are currently no plans to introduce digital central bank money. This also applies to the wholesale area.”

Fast forward to 2023, and 93% of the world’s central banks are engaged in some sort of CBDC project as uncertainty about short-term CBDC issuance fades, according to a survey by the Bank for International Settlements (BIS).

“The survey suggests that there could be 15 retail and nine wholesale CBDCs publicly circulating in 2030,” BIS said, noting that work on retail CBDCs has made more progress than wholesale coin projects.

But the BIS added that wholesale CBDCs could deliver “new functionalities enabled by tokenization, such as composability and programmability” to financial institutions.

However, there are still obstacles to CBDC issuance, as close to 80% of the world’s central banks are either barred from issuing a digital currency or operate in a country where the laws are unclear, Agustin Carstens, general manager of BIS, said in September. 

“Central banks have a mandate to meet those demands and have made significant investments to address the technical and operational requirements for CBDCs,” Carstens said during the BISIH-FSI conference in Basel, Switzerland. “It is simply unacceptable that unclear or outdated legal frameworks could hinder their deployment. The work to address these issues needs to begin in earnest. And it needs to proceed at pace.”