Even though Switzerland’s central bank has not decided on the way forward in its central bank digital currency (CBDC) issuance, it has hailed the testing phase a success. The digital franc trial entailed settling large scale transactions between financial institutions through an experiment dubbed Project Helvetia.
Boosting trade efficiency
“It looked at using central bank digital currencies (CBDCs) for so-called wholesale transactions between financial institutions to make trading assets on a planned SIX exchange that will specialize in digital versions of conventional assets more efficient.”
The SNB has aired its skepticism regarding digital currencies like Facebook’s Libra, which was recently rebranded to Diem because they might undermine its capacity to undertake monetary policy meant to attain its objective of price stability.
SNB’s governing board member Andrea Maechler acknowledged:
“The project showed wholesale CBDCs were feasible from a technical and legal viewpoint, but the outcome did not mean the SNB was committed to issuing one.”
The International Monetary Fund (IMF) recently delved into this issue and asked central banks not to throw caution to the wind when developing CBDCs because they have to develop robust legal frameworks for them to work.
Next trial phase scheduled for the third quarter of 2020
Cross-border payments are to be incorporated into the next trial stage planned for the third quarter of 2021. Global central banks are ramping up CBDC research because they see them as game-changers in easing domestic and international payments, given that transfers will be channeled through the internet and possibly even offline.
Last month, Olaf Scholz, the German Finance Minister, noted that the digital euro was an ideal financial instrument needed to fill the void triggered by the high demand for digital money from businesses and consumers in Europe. He, therefore, asked the relevant authorities to speed up the rollout of the European Central Bank (ECB) digital currency.
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