Swiss Government: CBDC Risks Outweigh Benefits
- Agreeing with the government, the Swiss National Bank stated that issuing a CBDC will be a major challenge.
- The Federal Council did say that CBDCs being restricted to financial market players would be “a more promising strategy”.
Swiss National Bank building. Shutterstock
The government of Switzerland has concluded that a central bank digital currency (CBDC) would do more harm than good, Reuters reported on 13 December.
According to the report, the Swiss parliament had requested that the government conduct an examination of the potential opportunities and risks that issuing a digital currency could have.
After an analysis, the Federal Council concluded that issuing a CBDC could bring risks of financial stability.
The Council said:
“Universally accessible central bank digital currency would bring no additional benefits for Switzerland at present. Instead, it would give rise to new risks, especially with regard to financial stability.”
Even though many are saying that digital currencies have the potential to improve payments and strengthen monetary policy, the Federal Council has stated that the real-world benefits of a CBDC may not meet expectations.
Sharing the governments view, the Swiss National Bank (SNB) said that the potential risks to the monetary policy of the country would be a major challenge.
In its report, the Federal Council did however say that if the digital franc was restricted to financial market players, and not available to the general public, it would be “a more promising strategy”.
The Council said:
“This would not have the same far-reaching and fundamental implications as universally accessible central bank digital currency. A ‘wholesale token’ issued by the SNB could possibly help to enhance efficiency in the trading, settlement and management of securities.”
The Federal Council said in October that while Switzerland is seen as crypto friendly and “open to innovative approaches in the financial market”, it will continue to keep close tabs on cryptocurrency and stablecoin projects, and their possible opportunities and challenges.
While Switzerland is skeptical on CBDCs, other countries are already actively researching and developing their own digital currencies. Most notable is China, which is already planning to conduct real-world trials of its digital yuan starting next year.
- The head of China’s central bank digital currency institute said the e-CNY has undergone a major upgrade, and should be made available as an option in all retail scenarios.
- The PBOC official noted that platforms can integrate the CBDC in the short term using QR codes, and focus on upgrading their payment tools in the long run.
Office building of the People’s Bank of China. Flickr
- The current governor of Florida, Ron DeSantis, announced he is joining the race for the 47th president of the U.S. during a Twitter Spaces event on Wednesday.
- During his speech DeSantis declared his support for Bitcoin and the wider crypto space, noting that if Joe Biden is re-elected “they’ll probably end up killing it”.
- Planned for 1 April, the CBDC trial will involve real consumers and real transactions, though they will be limited to a certain number of customers and transfers.
- The pilot, however, will not be opened to the general public in its first phase, and will only be opened to customers chosen by the 13 participating local banks.