Swiss National Bank plans tests on E-Francs – Blokkx Ltd.
Blokkx Ltd October 2019
Due to the changes in the technology sector with currencies such as Bitcoin, the SNB intends to collect the findings during tests with e-tickets.
Swiss National Bank plans tests on e-Francs
The time has come: After Germany recently announced its own blockchain strategy including digital securities for 2020 for the coming year, the Swiss central bank now also wants to take action. While to date the central bank has “only” been responsible for issuing cash and e francs are reserved for financial institutions with sufficient sight credit at the National Bank, normal consumers could soon also access the digital version of the national currency. At any rate, the latest news from the National Bank’s environment provides an insight into this.
New network with promising development opportunities
Initially, however, the bank will carry out a test run in close cooperation with SDX, the well-known blockchain exchange in the Alpine republic. The background of the test is primarily the insight that the change in the technology sector with currencies such as Bitcoin or Ethereum is also in full swing from a monetary point of view and can no longer be stopped. For the Swiss National Bank, the realization is reason enough to take place in the forefront of innovation-friendly players with a specially established “innovation hub”.
The central question is: Can the money of the central bank be tokenized securely and successfully? There is no question that many other European countries are also interested in the answer, but in many places, the necessary courage is lacking. Even in the case of the National Bank, Facebook’s Libra project could have been an essential trigger for its activities.
Reaction to Libra or long-planned project?
With real-time payments and supposedly low fees compared to the normal banking business, the Libra Foundation wants to add another alternative to traditional payment transactions. With the SIX stock exchange, the most important Swiss bank now knows the possibilities of the blockchain as an essential partner at its side. For some time now, securities have been able to be traded digitally on the stock exchange. The innovation hub was created in collaboration with SIX. The joint test aims to find out whether it is worth issuing an e franc as an SNB central bank token.
Digital francs with significantly faster transactions
The objectives of the test are clearly defined. The long lead times for securities trading of up to 48 hours are to be drastically reduced. This could be achieved, among other things, by streamlining the infrastructure and reducing the number of intermediaries involved in transactions. The risk potential will also be reduced. An ongoing “pioneer project” under the name Swiss Digital Exchange (SDX) is sounding out what options the infrastructure on DLT offers for real-time trading of digital assets. The first partners have already benefited from their involvement in the test mode, as the statement states. The marketplace is to open its doors to other interested parties in 2020. The cooperation partners attach great importance to the fact that the well-known high regulatory standards will also apply here.
Various ways of dissemination are conceivable.
As far as the E franc is concerned, we already have a clear idea of its implementation. Here, a connection between the SDX and Swiss Interbank Clearing (SIC) could be established within the framework of settlement in the DLT system. This fact would secure access to digital francs. On the other hand, the SDX could also handle the tokenization of the Stablecoin variant of the Swiss franc itself. In terms of security, experts see the best approach in tokenization of the national currency by the National Bank, including the issue. The SNB and SDX now want to put this approach to the test.
Will the Swiss franc token soon also be released for private use?
Important for potential private users: Up to now, private users have not had access to e francs, due to fears of excessive shocks to the traditional banking system. The “non-banking world” was therefore left out. The new cooperation of the Swiss monetary authorities could now bring about a turnaround. At least it is conceivable that electronic money could be made available to the central bank nationwide soon. Gradually, therefore, an opening is emerging. Incidentally, the hub network does not only include SIX and the SNB. The Bank of Central Banks (BIS) is also represented. The BIS is to channel know-how for the digitization of all affiliated central banks. Three locations are to be designated for hubs.
Different hubs deal with various topics.
In addition to Switzerland, the decision seems to have been made in favour of the Hong Kong Special Administrative Region and the innovative city-state of Singapore. Digitization of the Swiss franc will only be one area of work. At the same time, automated high-frequency trading will be researched for security and control purposes. In the latter area, there has always been a high-risk potential. The Asian hubs, on the other hand, are addressing the topics of “trade finance”, digital identities and payment transactions across national borders. As soon as the project became public, debates began on the part of the advocates and opponents of crypto technology. Some experts criticized the explanations for the increasing digitalization of securities trading. Especially the connection of a central point with the blockchain leads the technology ad absurdum according to some crypto fans. After all, decentralized distribution is an essential aspect of the crypto world.
Swiss importance as a crypto location continues to grow.
Advocates see the SIX Swiss Exchange as the ideal place for the test run on digital e francs. Especially with a view to possible extensions of the test system to other areas of the banking sector. Some experts even consider this step unavoidable to be able to keep pace with the global digitization process by tokenizing state money by central banks. Switzerland now wants to play a pioneering role in this process. And the chances are good that the country will continue to gain ground in the ranking of Europe’s leading countries with crypto expertise — even alongside Crypto Valley.
Published at Sun, 13 Oct 2019 07:35:12 +0000
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