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BIS And Swiss National Bank To Roll Out CBDC By The End Of 2020

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Governments across the globe seem to be fond of the idea of a digital currency, however, they continue to despise crypto assets. Yet, the introduction of the Central Bank’s Digital Currency [CBDC] into the global financial arena is substantial proof that the world has moved ostensibly towards digitalization. The latest news from the Swiss National Bank reveals that the development of CBDC is heading in a positive direction.

Swiss National Bank Joins Forces With BIS

A recent report revealed that the Swiss National Bank [SNB] and the Bank for International Settlements [BIS] was prepping to test a CBDC by the end of 2020. The collaboration of these banks came to light at the Bund Summit held on Sunday in Shangai. The Head of Innovation Center at BIS, Benoit Coeure spearheaded the summit and revealed that both the banks were going to roll out a CBDC in the proof-of-concept stage.

With the intention of launching a CBDC by the end of this year, Coeure pointed out that the incorporation of proof-of-concept would allow the experimenting of retail CBDC. Researching central bank digital currencies has been overseen by Coeure at BIS. The platform purposes to draw connections between the existing payment systems along with several other elements.

The partnership between the SNB and BIS dates back to 2019. Both the banking giants collaborated to explore the prospects of blockchain-based tokens. For its latest venture, however, BIS aims to bolster its level of blockchain. During the early stages of their partnership, SNB had stated,

“This new form of digital central bank money would be aimed at facilitating the settlement of tokenized assets between financial institutions.”

BIS further announced its plans on joining forces with several other banks across the globe. Hoping to inspect its cross-border abilities, Coeure revealed that BIS would work closely with the Hong Kong Monetary Authority as well as the Bank of Thailand.

While China is well ahead in its CBDC game, other countries along with banks have been trying to catch up with the Asian country.

Coronavirus Pandemic to Trigger CBDC Development Globally

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The Bank of International Settlements (BIS) anticipates the effect of the coronavirus pandemic on retail payments to trigger positive development of CBDC globally. BIS is a Swiss-based international organization comprised of 60 central banks. The organization has released several reports centered on decentralization, cryptocurrencies, and central bank digital currencies (CBDC). CBDCs refer to state-issued cryptocurrencies, whose legal tender depends on the regulatory structure of a government.

Coronavirus impact on global payments

BIS ‘latest June 24 report suggests that the coronavirus pandemic has inflicted extreme changes in retail settlements. In addition, the report outlines the advantages and disadvantages of the current payment systems.

The report, for starters, highlights the rapid deterioration of fiat payments due to the risk of transmitting the virus between traders and consumers. And the economic uncertainty has caused “precautionary holdings” in fiat, leading to a decline in daily cash transactions.

Around the same time, restrictions levied by national governments, such as closing down tangible shops, have contributed to a steady decline in payment settlement on e-commerce. Besides, the fall in travel has led to a decrease in international visa transactions, and a substantial decline in remittances from migrants.

BIS says both of these changes show the benefits and limitations of the current payment system. Digital payment systems, on the other hand, have made it possible for many commercial operations to operate given the great disruption to daily activities.

“The crisis has amplified calls for greater access to digital payments by vulnerable groups and for more inclusive, lower-cost payment services going forward.”

Opportunity for CBDC development globally

In this regard, the BIS report outlines that CBDC development is globally at the frontier of policy opportunities “for central financial authorities;” could amount to a sea change. ” It notes that a successful CBDC could provide” a new, secure, trusted, and widely accessible digital payment method.

The BIS also noted that it would continue to offer its assistance to central banks worldwide in CBDC research and design. The organization has demanded global cooperation to ensure that post-COVID-19, future changes in international payments will be less split, more comprehensive, and more productive.