Swiss National Bank economist says blockchain is not suitable for CBDC

Blockchain, the underlying technology of cryptocurrencies such as Bitcoin (BTC), is not the right solution for a digital central bank currency, according to an economist at the Swiss central bank.

Carlos Lenz, chief economist at the Swiss National Bank, argues that blockchain-based decentralization functions don’t work well for state-controlled digital currencies like digital francs, banknotes, etc. The German-language Swiss newspaper reported on Thursday.

Economists have reported that there are a variety of technological ways to build a digital franc. “One could imagine a direct account at the National Bank. We didn’t want that, but that would be the simplest form, ”says Lenz. Another option could be to use blockchain technology, which enables digital currency operations without central authority, he noted. However, blockchain is “very inefficient”, argues the economist: “I don’t think a decentralized solution is ideal.”

The Swiss central bank currently has no plans to introduce a digital franc, said Lenz. The economist emphasized that “the current payment system works well” and that there is no need for a CBDC in Switzerland. There is also no risk that the franc could be replaced by other currencies such as the euro if Switzerland wanted to evade the CBDC developments, added the economist.

The implementation of blockchain technology for state-controlled digital currencies has been questioned by many global financial experts. The deputy SNB member Thomas Moser argued last year that the use of blockchain for a CBDC for private customers was unnecessary, since the trust is provided by the central side of a central bank. However, last year the SNB was still investigating the blockchain-based advantages of implementing a CBDC.

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Despite the ongoing debate over whether or not CBDCs really need blockchain, the Chinese government continues to experiment with distributed ledger technology to simplify CBDC transactions. In mid-June, People’s Bank of China successfully completed a digital yuan salary payment using blockchain technology.