Cryptofranc to bring no additional benefits to Switzerland, Federal Council warns

Maria Nikolova

Universally accessible central bank digital currency would give rise to new risks, especially with regard to financial stability, Switzerland’s Federal Council says.

During its meeting held today, Switzerland’s Federal Council approved a report examining the opportunities and risks of introducing a cryptofranc (e-franc). The Council concludes that universally accessible central bank digital currency would bring no additional benefits for Switzerland at present. Instead, it would give rise to new risks, especially with regard to financial stability.

The Wermuth postulate (18.3159), which was adopted by the National Council, had requested the Federal Council to examine the opportunities and risks of introducing a cryptofranc. The Federal Council had recommended that the postulate be adopted, as it has noted the increased interest in cryptocurrencies, digital payment systems and digital central bank currency. In a report published today, it has addressed the main questions relating to central bank digital currency.

The analysis conducted for this report shows that the introduction of a central bank digital currency will result in repercussions that can be far-reaching depending on the design, and that there are better solutions for most of the areas considered. The Federal Council therefore believes that universally accessible central bank digital currency would not bring any additional benefits at the moment. The Swiss National Bank (SNB) shares this view and sees the newly arising risks to monetary policy and financial stability, in particular, as a major challenge.

With regard to increasing the efficiency and security of cashless payment transactions, central bank digital currency conveys no advantages in Switzerland. The existing system is efficient and secure, and is also being refined continuously. There is room for improvement in the area of cross-border payments. However, the introduction of cryptofranc would not solve this problem. It would be preferable to improve interoperability between the existing systems and coordination between the parties involved.

In terms of the SNB’s monetary policy, the verdict on universal accessibility to central bank digital currency would be negative, as it would bring new risks rather than discernible benefits, the Council says. Such currency would not increase the leeway in terms of monetary policy. On the contrary, it would carry the considerable risk that – depending on the design – greater foreign demand for Swiss central bank digital currency could put the Swiss franc under heightened upward pressure, especially in times of crisis.

With regard to financial stability, the overall impact is rather negative. Relative to today, central bank digital currency would be likely to increase the risk of bank runs, even though it could have a disciplinary effect on the banking sector as an alternative investment.

As things currently stand, the further development of central bank digital currency that is restricted to financial market players would appear to be a more promising strategy. This would not have the same far-reaching and fundamental implications as universally accessible central bank digital currency.

The Federal Council and the SNB will continue to monitor developments in this area closely.

Read this next

Metaverse Gaming NFT

Astar Network’s ad features 329 top brands to support Web3 in Japan

Blockchain innovation hub Astar Network is making strides in promoting the Web3 adoption worldwide. In yet another milestone, the smart contracts platform has run a national newspaper ad in Japan that set a new global record with participation from 329 blue-chip firms.

Digital Assets

Pyth Network welcomes onchain data from crypto market maker Auros

“By sharing our high-frequency trading data with a truly onchain decentralized network, we aim to foster innovation that will lead to better financial solutions for all participants.”

Digital Assets

Tokeny integrates Ownera to boost liquidity of tokenized assets

“The adoption of FinP2P will result in higher liquidity and better access to capital and assets by providing regulated firms with one secure point of connection to multiple digital asset networks across the globe.”

Digital Assets

BingX launches subsidy vouchers to cover user losses in copy trading

“With the introduction of copy trade subsidy vouchers, new users can easily try out trading strategies without incurring losses.”

Digital Assets

Talos expands sales team: Frank van Zegveld, Matt Houston, Hillary Conley

“The extensive leadership and industry expertise of these new hires will enable us to build long-lasting relationships as we continue to build out our global presence in EMEA and beyond.”

Executive Moves

FX and CFD broker Emporium Capital hires industry veteran Robert Woolfe as COO

His past experience within the FX and CFD industry includes top roles at Capital Index, London Capital Group, GKFX, ETX Capital, and IG.  “I’m delighted to be part of the Emporium Capital team and spearheading the brokerages global expansion plans”, he said about the appointment.

Retail FX

Hantec Markets wins six categories at Global Retail Forex Awards 2022

Hantec Markets has recently rebranded with a new website and a renewed growth strategy that features the #TimeToStrike hashtag to signify a time of renewed growth for the broker.

Industry News

Nexo sued for operating crypto brokerage without license and lying about it

“Nexo violated the law and investors’ trust by falsely claiming that it is a licensed and registered platform. Nexo must stop its unlawful operations and take necessary action to protect its investors.”

Industry News

Apex Group launches EU Taxonomy Solution as part of ESG offering

“Enabling our in-scope clients to demonstrate alignment with the EU Taxonomy is only the beginning – with over twenty green taxonomies in place, in development or under discussion worldwide it is crucial that investors act to understand and report taxonomy alignment data sooner, rather than later.”

<