Switzerland is practically ready to launch a wholesale central bank digital currency (CBDC).
Working in concert, the Bank for International Settlements (BIS), the Swiss National Bank (SNB) and the country’s stock exchange, SIX, have test-driven the integration of wholesale CBDC settlement.
Also included in the prototype were five commercial banks: Citi, Credit Suisse, Goldman Sachs, Hypothekarbank Lenzburg and UBS.
Wholesale CBDC is not to be confused with a digital currency issued by a central bank that would find its way into retail bank accounts, something Switzerland has already ruled out.
“Wholesale” in this context is all about connecting financial market infrastructures and streamlining transactions so that a digital cash token can be instantly swapped with a token representing another financial asset, for instance, and done in such a way that any credit risk is removed from the system.
When CBDC?
So far, no one at the SNB or SIX has said the launch of a wholesale CBDC in Switzerland is imminent, despite seeming to have stolen a march on most of the world. That said, most countries have begun at least kicking the tires on CBDCs in some form.
A report issued earlier today by the U.K.’s House of Lords Economic Affairs Committee concluded that a retail-facing CBDC might be “a solution in search of a problem.” However, the Lords report was more optimistic about the introduction of a wholesale CBDC, which could “enhance efficiency in securities trading and settlement,” adding that “further exploration and experimentation are necessary.”
