Many central banks, including the Swiss National Bank, are researching digital central bank money. Later this year, the SNB plans to issue a true wholesale CBDC on SDX for selected transactions.
Several countries have made significant progress on central bank digital currencies (CBDC) this year, with a growing number working on introducing one. According to the Atlantic Council, 65 countries are currently at an advanced stage of development and more than 20 central banks have launched pilot projects.
Research on a central bank digital currency is also a high priority in Switzerland, where the SNB has two projects dubbed «Helvetia» and «Jura». However, there are also risks associated with the introduction of CBDCs. After all, changes in the monetary system can be problematic, even if they seem minor at first glance.
Weighing the Risks
The transition from physical to digital cash needs careful consideration, especially over potential impacts on the financial system.
«One concern is that CBDCs could compete with commercial banks' book money and commercial banks could lose customer funds on a large scale, either permanently or at least during periods of high uncertainty», says Thomas Moser, deputy member of the SNB's Governing Board, in an interview with the «Crypto Valley Journal». The more CBDCs resemble banks' demand deposits in their functionality, the greater the risk, he said.
Coexistence with Stablecoins
A CBDC based on what is known as the wholesale model and not accessible to the general public but only to regulated financial institutions would have little immediate impact. «It would, however, allow the current financial system to use blockchain securely», Moser said.
Asked whether a coexistence of stablecoins and CBDC is conceivable for the SNB, Moser replies, «On the blockchain, stablecoins resemble the book money of banks in the traditional financial system, to that extent a coexistence of CBDC and stablecoins is quite conceivable».
But «Stablecoins must offer added value compared to CBDCs so that customers do not exclusively hold and use bankruptcy-proof CBDCs», he cautions.
SDX Test Run
Moser adds that the SNB is experimenting intensively with the wholesale model, where a CBDC is only available to regulated financial market institutions, just like the accounts at the SNB today. In Switzerland, where SDX, a regulated blockchain-based exchange, already exists, the question of the need for a wholesale CBDC is «not only of theoretical but already of practical relevance.»
In the reports on its «Helvetia» and «Jura» projects, the SNB had demonstrated the technical feasibility, he said. «We are currently deepening this work. For example, we will issue real wCBDC on SDX for selected transactions this year», Moser said.
