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Retail digital franc remains taboo for Switzerland

Switzerland has no plans to launch a centralised Swiss franc version of bitcoin. (© Keystone / Christian Beutler)

Switzerland has ruled out the possibility of a central bank-issued digital franc for the general public in the foreseeable future. The government has backed up the Swiss National Bank’s (SNB) fears that this would lead to financial instability.

Responding to a parliamentary question, the Federal Council on Friday said an ongoing project to produce a digital franc that is restricted for use by financial players was a more sensible option than a cryptocurrency for people to buy their groceries or other goods.

Its report acknowledged claims that digital currencies could make payments more efficient and help tackle money laundering. But it concludesexternal link that “central bank digital currency cannot meet these expectations, or only partly,” and that such a move could bring “newly arising risks to monetary policy and financial stability”.

However, the report addsexternal link: “Rapid technological developments, changing payment behaviour and needs, and the experience of other countries may lead to a reassessment of the opportunities and risks of CBDC for the general public in the future.”

The SNB is currently working with stock exchange operator SIX Group to produce a digital version of the franc to settle trades on the planned new digital exchange SDX. This would entail trading counterparties depositing francs at the SNB in exchange for a corresponding value of digital tokens to use purely on the SDX platform.

Several other central banks are also exploring similar options, including reports that China is poised to launch a digital renminbi. The private sector has also jumped on the bandwagon with projects such as the JP Morgan Coin and the Utility Settlement Coinexternal link, which was put into motion by UBS before widening into a consortium of global banks.

Libra project

The most talked about endeavour to date is Facebook’s Libra digital token project that was officially launched in Geneva in the summer. Libra intends to create digital tokens backed up by deposits of traditional currencies. But it has apparently stalled due to a backlash from central banks and governments around the world.

The current debate around digital currencies stems from the creation of bitcoin in 2009. The cryptocurrency emerged as a challenger to traditional currencies, taking the creation and control of bitcoins away from the financial sector and into the hands of individual holders.

But bitcoin’s credibility as an alternative payment system suffers from its volatile value in relation to the US dollar. Pegging digital currencies to the likes of the franc or the dollar is seen as a means to control this volatility.

But central banks fear this will turn them into commercial banks as people deposit their cash to convert into digital tokens. This would, says the SNB, deflect it from its goal of ensuring price stability in the economy.

Governments are also concerned about losing control of currencies to private sector projects, or decentralised cryptocurrencies such as bitcoin.

Full story here
Matthew Allen
When not covering banks, tax disputes, trade, Brexit, the World Economic Forum and FIFA, swissinfo.ch's business correspondent can be found playing cricket on various grounds in Switzerland - including the frozen lake of St Moritz. Initials: mga
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