The Swiss central bank is not at all convinced about the case for a digital central bank currency made available to citizens. The bank fears unforeseeable risks to the financial stability of the country.

The Swiss central bank (SNB) isn’t known to often resort to bold language. But Andréa Maechler, one of the three members of the directorate, didn’t mince her words at a central bank do on Thursday evening in Zurich. The SNB doesn’t favor the introduction of a digital currency for citizens.

«Digital central bank money for the general public is not necessary to ensure an efficient system for cashless retail payments,» Maechler said. «It would deliver scarcely any advantages, but would give rise to incalculable risks with regard to financial stability by calling into question the tried-and-tested two-tier system.»

All for Private Solutions

The bank’s clear-cut statement must sooth the nerves of commercial banks. An electronic franc made available to the public by the SNB would alter the fundamental position of the central bank.

As a business partner for consumers, the SNB would slip into the role of a bank and as such become something of a competitor to the likes of UBS and Credit Suisse.

«We are convinced that private sector solutions are better suited for meeting end customers’ needs in this area,» Maechler said.

Riksbank E-Krona Study

In her speech, the SNB representative didn’t mention projects under consideration in other countries, specifying merely that no central bank to date had implemented such a solution.

She also didn’t approach the study published by the Swedish central bank a year ago, which in detail discusses the potential use and advantages of an e-krona. In Sweden, the use of cash has retreated much further than in Switzerland, which makes consumers more dependent on payment solutions provided by private commercial banks – a Riksbank e-krona would offer an alternative.

Prepaid Solution

In practice, the potential alternative discussed in Sweden would include the issuance of prepaid payment solutions, allowing citizens to make payments using a state-controlled system independent of commercial interests.

Of course, Switzerland has a cash-loving populace. Retailers still receive a large proportion of payments in cash. And the central bank currently is exchanging its set of bank notes and has no plans whatsoever to get rid of cash.

And yet, the distinctness of the bank’s rebuke to the demands for a digital currency for the general public at this stage comes as a surprise, given that other institutions only just started studying the potential of such a currency in the digital age.