SNB Favours a Token-Based CBDC Design

The Swiss National Bank (SNB) issued its working paper 3/2021 'How to issue a central bank digital currency'.

Written by David Chaum, Christian Grothoff and Thomas Moser, the paper presents the SNB’s thinking about a token-based retail CBDC, a rather different approach from most other central banks. The overriding priority for the SNB is privacy and it believes this approach can deliver that and achieve the broader benefits claimed for CBDCs.

The paper is clear that this is about how one might design a CBDC, and not a decision to issue one.

Theory and hazards of CBDCs

As with many papers, this one describes the two forms of central bank money.

First, reserves in the form of settlement accounts used by selected financial market participants to settle interbank transactions. Wholesale CBDCs are the equivalent and the SNB is clear that for domestic settlements, tokenisation and Distributed Ledger Technology (DLT) do not offer compelling benefits compared with today’s alternatives, particularly Real Time Gross Settlement systems.