Much has been said about Central Bank Digital Currencies (CBDCs) and governments’ affinity for them. While China and Japan appear to be at the forefront of this digital currency innovation, Switzerland appears to be making significant progress.
Transforming the Payment System
Yesterday, the Swiss Center of the Bank of International Settlements’ Innovation Hub (BISH), announced that it had completed two proofs-of-concept for a possible wholesale CBDC. Dubbed “Project Helvetia,” the new CBDC initiative is a collaboration between the BISH, the Swiss National Bank (SNB), and Six Group, the country’s top stock exchange.
A separate announcement from the Six Group highlighted that Project Helvetia would explore the legal and technological feasibility of transferring digital assets via a wholesale CBDC.
From there, the assets will move to the Six Digital Exchange, the stock exchange’s proprietary distributed digital asset platform. The platform will also include services like toke issuance, trading, custody, management, and settlement.
Although the development shows that Switzerland’s top financial minds believe blockchain has a role in the country’s financial future, it doesn’t necessarily indicate that they will use it in launching a wholesale CBDC. The partners also highlighted that the experiment doesn’t solidify their interest in establishing a CBDC.
Andréa Maechler, a governing board member at the SNB, highlighted that the project indicates the agency’s acknowledgment of innovative technologies. Thus, they simply don’t want to miss the chance to incorporate these technologies into the financial system.
“Irrespective of which technologies the financial markets adopt next, the safety and reliability of Swiss financial infrastructure must be preserved. If [distributed ledger technology] can deliver significant improvements in securities trading and settlement, then the SNB will be prepared,” he emphasized.
Still Dallying on the CBDC Issue
The BIS itself has been quite reluctant to dismiss the importance of cash in favor of CBDCs. Last month, Benoît Cœuré, the head of the Innovation Hub, argued that fiat money would remain its position despite the growing CBDC frenzy.
Cœuré highlighted in his interview that while cash isn’t being used so much as a payment means, it is still a considerable currency form. Instead of pushing or CBDCs to be the status quo for payments, he counseled that governments should focus on providing a variety for their citizens.
While countries in the Euro area remain split in their opinions, China and Japan are moving ahead quickly. China already began conducting tests for its digital yuan, consolidating several partners and regions to be a part of the tests to see how the asset will operate.
As for Japan, it will begin a proof-of-concept for its digital yen next year. In October, the Bank of Japan sent a document to the BIS, highlighting that it would build an asset that can work for wholesale and retail customers. The agency added that its preferred digital asset would be able to work amid infrastructural breakdowns – especially in the face of natural disasters.