The Swiss National Bank will launch a pilot project for a wholesale Central Bank Digital Currency (CBDC), which is equivalent to bank reserves.

According to a report by Reuters, Thomas Jordan, the Chairman of the Swiss National Bank (SNB), announced on Monday at a meeting in Zurich that as part of a pilot project, SNB will issue wholesale central bank digital currency (CBDC) on the SIX digital exchange SDX.

Wholesale CBDC Represents Central Bank Money Equivalent to Reserves

Chairman Thomas Jordan stated:

This is not just an experiment, it is real money equivalent to reserves, with the aim of testing real transactions with market participants.

Compared to using tokenized securities, the Swiss National Bank has been more cautious about the use of retail CBDC. Jordan is concerned that retail CBDCs may pose potential risks to the financial system and are more difficult to control.

Swiss National Bank Governor Andrea Maechler also stated in a speech at another forum that, although the Swiss National Bank is exploring CBDCs, cash will not disappear in Switzerland. Maechler said:

Cash is a way for retail households to hold central bank money. Regardless of technological developments, this basic function needs to be maintained.

Switzerland Began CBDC Trials as Early as 2019

In October 2019, the Swiss Stock Exchange SIX collaborated with the Swiss National Bank to explore technical options for CBDCs. In the recent second round of trials, Citigroup, Credit Suisse, Goldman Sachs, Hypothekarbank Lenzburg, and UBS participated, hoping to issue real-time wholesale CBDC on the SDX network, a subsidiary of SIX based on blockchain technology, which has obtained regulatory approval from FINMA to support transaction settlements.

The Swiss National Bank is also collaborating with the Bank for International Settlements (BIS) and the financial regulators of France and Singapore to explore cross-border CBDC transactions and settlements using DeFi protocols through the Mariana project, adopting smart contract models with automated market makers (AMMs) to achieve the vision of atomic transactions. The project, which began in September last year, is expected to provide a concept verification by mid-year.

Innovative and Crypto-Friendly Switzerland

Ark Invest previously pointed out in a report that the uncertainty of U.S. crypto regulation will be overtaken by the UAE, South Korea, and Switzerland in the crypto industry. By the end of 2022, Switzerland had a total of 437 fintech companies, and the related industry continues to grow. In global rankings of the best conditions for fintech companies, Zurich and Geneva rank second and third after Singapore.

The Distributed Ledger Technology (DLT) Act passed in 2021 introduced the new concept of "Uncertificated Register Securities," aiming to increase the legal certainty of "tokenized" rights and financial instruments. Therefore, asset tokens, utility tokens, hybrid tokens, and stablecoins can all be issued in the form of Uncertificated Register Securities. With the DLT Act and authorization from the Swiss Financial Market Supervisory Authority FINMA, Switzerland has long been engaged in various financial innovation services.

For more on Switzerland's crypto-friendly initiatives, see: Is Switzerland the Next Crypto Haven? Distributed Ledger Act Supports Tokenized Assets, Swiss Franc Stablecoin