Switzerland Launches CBDC Trial and China Expands Digital Yuan to Commodities Markets

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The central bank of Switzerland is preparing to issue a wholesale central bank digital currency (CBDC) on the country’s SIX digital exchange as part of an upcoming pilot project, a representative from the bank announced on Monday.

According to a report from Reuters, Thomas Jordan, chair of the Swiss National Bank (SNB), announced the upcoming pilot project at the Point Zero Forum in Zurich on Monday. “This is not just an experiment,” he said. “It will be real money equivalent to bank reserves and the objective is to test real transactions with market participants.”

An exact date for the pilot was not provided, but Jordan said that it will start “soon” and will take place for “a limited time.”

The trial will focus on exploring a wholesale CBDC (wCBDC), which the bank uses to settle interbank transfers and related wholesale transactions in central bank reserves. A retail CBDC (rCBDC) would be used by the general public to conduct daily transactions, but at this time, the SNB is only exploring the use of a wCBDC.

Jordan said the SNB has concerns related to the potential risks that an rCBDC poses to the country’s financial system, noting that they are more difficult to control. “We do not exclude that we will never introduce retail [CBDCs] but nevertheless we are a little bit prudent at the moment,” he said.

SNB governor Andrea Maechler said that while the bank is exploring the use of digital fiat, cash will continue to play a significant role in Switzerland. “It is the one way that retail households can hold central bank money,” she said. “That feature needs to be maintained irrespective of the technology.”

According to data from CBDCtracker.org, there are currently more than 110 countries around the world exploring the creation of a CBDC, with the majority currently in the research and pilot phases.

China is currently the global leader in the development of CBDCs, with the pilot program for the digital yuan currently being tested in 17 provinces across the country, including 36 large cities and 5.6 million merchants.

Evidence that the pilot project for the digital yuan continues to expand was released on Monday, with the Shanghai Clearing House, a financial services clearing counterparty under China’s central bank, announcing the start of digital yuan clearing and settlement services for trading in commodities, marking another significant step in the institutional adoption of China’s CBDC.

According to the Monday announcement from the Shanghai Clearing House – which handles bonds, interest rates, foreign exchange, credit, and commodities – the new service allows users to make cross-bank clearings and settlements on commodities with the digital yuan, with no fees charged for the services for the time being, according to a notice on its website.

Dong Dengxin, director of the Finance and Securities Institute of the Wuhan University of Science and Technology, told the Global Times that the service will make cross-border settlement of bulk commodities more secure, faster, more efficient, and more cost-effective for financial institutions and service providers.

China is now the world’s largest buyer of a number of commodities, Dong added, so the move is expected to help facilitate the internationalization of the Chinese currency and provide the world with a trusted clearing system.

“This process will not be completed overnight, but China is relatively advanced in this field,” Dong said. He added that the future development of the e-CNY depends on strong technological support, research and development, expansion and promotion in encryption technology, artificial intelligence, and digital security.

The digital yuan is also being tested with Hong Kong’s Faster Payment System (FPS), according to Chan Mo-po, finance secretary of the Hong Kong Special Administrative Region (HKSAR).

Chan said that the trial being conducted by HKSAR and the People’s Bank of China has entered the second phase of testing, which will explore the use of FPS to refill digital yuan wallets so that Hong Kong residents can use the currency on the mainland in the future.

Source : Kitco