Swiss National Bank tests digital franc

On December 1, the Swiss National Bank (SNB) is launching a pilot project in collaboration with six commercial banks. For the first time, the financial institutions will process real transactions with a digital Swiss franc.

Digital franc: what it's all about

Blockchain technology is playing an increasingly important role in the financial sector.

From December, the SNB and six Swiss banks will start processing transactions with a state-issued, digitized Swiss franc.

The digitized franc will be issued on a blockchain and is intended to make payment transactions more efficient.

https://www.20min.ch/story/digitaler-franken-nationalbank-testet-ab-dezember-staatliche-waehrung-115934803285

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Article translated with Deepl:

The SNB ensures the supply of cash in Switzerland and has the task of guaranteeing efficient payment transactions and stability for the Swiss financial center. Also with regard to the increasing implementation of blockchain technology in the financial sector.

Cryptocurrencies such as Bitcoin, Ethereum and Ripple can now also be traded at Swiss banks and more and more assets are being tokenized, i.e. mapped on a blockchain. In order to keep pace with this development and live up to Switzerland's reputation as a leading financial and technology center, the SNB has been testing the possibilities of a state digital franc for several years. The project is called Helvetia.

SNB (Swiss National Bank) launches pilot phase with digital Swiss franc

This project is now entering its third phase. On December 1, the SNB will be one of the first national banks in the world to introduce a real Swiss digital franc for the settlement of digital securities transactions for financial institutions. Six banks are involved in the pilot project, which will run until June 2024: Banque Cantonale Vaudoise, Basler Kantonalbank, Commerzbank, Hypothekarbank Lenzburg, UBS and Zürcher Kantonalbank.

The banks can process real transactions in a live environment. The regulated SIX Digital Exchange (SDX), which is based on blockchain technology, serves as the platform. Previous project phases took place in a test environment.

It remains to be seen whether the digitized franc will actually be used after the pilot test.

Will the digital franc replace cash in the future?

In short: No, cash will continue to exist.

The somewhat longer answer: there are two types of digitized central bank currencies, so-called CBDCs (short for Central Bank Digital Currency): the wholesale CBDC and the retail CBDC. The digital Swiss franc, which the SNB will be testing from December, is a wholesale CBDC. This is only available to commercial banks and other financial institutions.

Retail CBDCs, on the other hand, are available to the general public and companies. Such a retail CBDC is being tested in Sweden, for example, with the e-krona issued by the National Bank. The SNB does not wish to introduce such a retail CBDC.

Isn't there already a digital franc?

Yes, there are several. Postfinance and other banks are currently testing the launch of a digital franc in the form of a stablecoin, a specific type of cryptocurrency.

However, Postfinance's digital franc is still in the test phase and is only intended as a supplement to the existing payment system and not as a replacement for cash.