Switzerland is one of the first countries in Europe to make a big move towards a Central Bank Digital Currency. The Swiss National Bank (SNB) and the Bank of International Settlements (BIS) have officially signed an agreement to develop a BIS Innovation Hub in the country. This organization will launch a blockchain-powered digital currency backed by the central bank.
BIS will also open hubs in Hong Kong and Singapore. The department in Switzerland focuses on two projects. The first is introducing a CBDC, aimed at facilitating settlements between financial institutions. The second project is about tracking and monitoring the fast-paced electronic market, while implementing greater automation despite more fragmentation in the financial market.
Despite the happy announcement, not everybody within the BIS has been a supporter on a digital currency. General Manager Agustin Carstens criticized digital assets in the past. He condemned bitcoin as a ‘Ponzi scheme’. In addition he warned other central banks to avoid the idea of Central Bank Digital Currencies. However, now he believes that the innovation center and the digital currency will ‘further improve the central banking ecosystem’.
“We are very proud that one of the first three Hub Centres will be here in Switzerland, where the BIS has been based for nearly 90 years. Switzerland is a hotbed of innovation. This comes on top of its overall competitiveness, well-established financial ecosystem, and strong academic institutions specialising in technology.”Agustín Carstens, General Manager of the BIS – press release October 8th 2019
Banking system embracing digital money
Digital money has some very positive aspects for the banking world. First of all banks can cut costs thanks to automation and smart contracts. In addition they can track money flows much better. A world without physical coins and paper money would make every transaction visible to banks worldwide. ING Bank thinks that most central banks will have a digital currency within the next three years.
Switzerland is not the only country with plans for a Central Bank Digital Currency. China is planning to launch its own digital currency within the next 12 months. Despite rumors of a November launch, China has denied the launch of a digital yuan this year. In the United States there’s a movement that wants to push for the development of a digital currency, while the European Union is also contemplating the idea. For example Germany wants a digital euro.
Also published on Medium.