In brief

  • Swiss central bank is building its own digital currency.
  • It wants to issue and run the currency itself, rather than use a third party stablecoin.
  • It is trialling a joint approach but is pessimistic about the results.

Switzerland’s central bank clarified today that it wants a pure digital currency, in order to take full advantage of the technology. Speaking at Coingeek 2020, Thomas Moser, alternate member of the governing board at the Swiss National Bank (SNB), explained that the most likely outcome isn’t the most optimal.

In October 2019, the SNB partnered with Swiss stock exchange operator SIX group to work on a digital currency proof of concept. SIX group is also working on its own digital exchange, called Swiss Digital Exchange (SDX), set to go live at the end of the year.

Swiss francs are going digital. But when? Image: Shutterstock.

While they are working together on a prototype, Moser explains that, if the Swiss central bank doesn’t release its own coin by the end of 2020, SIX will launch its own Swiss franc stablecoin. A situation he feels is less than ideal.

“Then you have a stablecoin but this is the problem: you have a counterparty risk involved. If SDX goes bankrupt, you have a problem,” he said.

The idea is that the stablecoin would be issued by SDX, which would hold Swiss francs in a bank account as collateral. Any buyers of the token would be able to redeem them one-to-one for Swiss francs with the company. But they wouldn’t be able to do so with the Swiss central bank or any other company.

Pushing for a true digital currency

Instead, Moser wants the central bank to launch and issue its own digital currency. He said, “The better solution...is that settlement is done with central bank money that doesn’t involve counterparty risk. That’s the exciting approach that we are working on.

“We would actually be the node running the blockchain and tokenizing the money for the individual accounts,”he added. “Then they can pay and settle their payments on the blockchain with a tokenized Swiss france provided by the Swiss central bank.”

Moser said they are also trialling a joint approach, using both a Swiss franc token and combining it with their settlement system. However, he acknowledged that other central banks have found this system ineffective and no better than the traditional system. So, it looks like it’s all or nothing.