Swiss Say They Were Successful With Digital Currency Experiment

(Bloomberg) -- The Swiss National Bank and partner organizations said they successfully conducted experiments to push forward understanding of how digital currencies could work within the country’s financial system.

In ‘Project Helvetia’ the SNB, the Bank for International Settlements and the financial infrastructure operator SIX linked the existing interbank payment system to a distributed ledger, according to a joint press release Thursday. They also tested issuing digital currency onto a blockchain-like platform.

Both approaches had pros and cons, and more research is needed, officials said on Thursday. While using a digital currency for payments within the financial system has benefits, it would raise “major policy and governance hurdles,” they said.

Central banks around the world are increasingly testing the use of digital currencies, spurred by advances in technology and the shift to electronic payments that’s been accelerated by the pandemic. The People’s Bank of China has already tested use of a digital yuan with members of the public.

“There are policy issues that are very important for central banks that aren’t covered by this report,” said Benoit Coeure, who runs the BIS unit looking into digital currencies. These include questions related to the creation of a new type of base money and what that might mean for controlling the monetary base, he said.

The Swiss focus is squarely on wholesale digital currency, and SNB Governing Board Member Andrea Maechler said the research project wasn’t a commitment to issuing one.

European Central Bank President Christine Lagarde said last month her “hunch” is that her institution could create a digital currency within a few years.

©2020 Bloomberg L.P.