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The Swiss National Bank (SNB) is set to launch a proof-of-concept test for a digital currency in 2020. As reported by a Chinese news outlet, the Swiss apex bank will run the test in collaboration with the Bank for International Settlements (BIS).
BIS Chief Benoit Coeure revealed key details on this latest development at the Bund Summit held in Shanghai on Sunday. According to Coeure, the proof-of-concept will be undertaken to analyze how the digital currency would work, and the infrastructure required. It will also enable the financial institutions to explore how to integrate existing payment systems and monitor compliance within the digital currency ecosystem.
BIS will also work with Honk Kong and Thailand’s central banks to explore cross-border applications of digital currencies. SNS and BIS first partnered last October to explore a blockchain-based digital currency that would enable quicker settlement of digital assets between financial institutions.
The Swiss National Bank has been working on integrating a digital currency framework and recently collaborated with seven other banks to release a 26-page report on how digital currencies should function. The report highlighted that digital currencies should coexist with other forms of money within its jurisdiction. It also stated that central banks should not change fiscal and monetary policies when issuing a CBDC.
CBDCs gaining momentum globally
CBDCs have gained momentum in recent months as more central banks have expressed interest in launching Digital currencies. The development of CBDCs is largely in response to the threats of cryptocurrencies to the traditional monetary system. Bitcoin’s success caused a major change in traditional finance since a central bank does not control it. The creation of CBDCs is a way Central Banks can exert control while adapting to changes in the financial system.
The Bahamas recently launched its digital currency ‘’Sand Dollar,’’ making it one of the few countries. China also recently distributed an Airdrop for its digital Yuan in Shenzhen. The airdrop lasted a few days and was successful with subsequent tests planned for other cities in the country.