World Bank to Float Digital Bond in Swiss Franc Currency

The World Bank has been a pioneer in financial innovations, including the first currency swap in 1981. Now, it explores the issuance of a digital bond using the Swiss central bank digital currency, as revealed by its treasurer, Jorge Familiar. The institution has leveraged DLT for digital bonds since 2018, but this would mark its first venture with a CBDC. The bank remains engaged with CBDC developments in Switzerland, while the SNB emphasizes the efficiency of private sector payment instruments and downplays the need for retail CBDCs.

World Bank Considers Issuing Digital Bond Settled in Digital Swiss Franc

ZURICH, Switzerland - The World Bank, a renowned global financial institution, is exploring the issuance of a digital bond that would settle in the digital Swiss franc, the virtual counterpart of the traditional Swiss currency.

Digital Bond Initiatives

Jorge Familiar, the World Bank's treasurer, revealed this development at an industry event hosted by the Swiss National Bank (SNB) in Zurich. He highlighted the World Bank's ongoing efforts to leverage distributed ledger technology (DLT) for the issuance of digital bonds.

In 2018, the World Bank made history by issuing its first digital bond entirely on DLT in Australia. This was followed by a €100 million digitally native note issued in October 2023 on Euroclear's issuance platform and listed on the Luxembourg Stock Exchange.

Next Step: Central Bank Digital Currency

According to Familiar, the next logical step is to issue a digital bond settled in a central bank digital currency (CBDC). He expressed the World Bank's interest in exploring such a possibility, contingent on favorable market conditions and the ongoing CBDC developments in Switzerland.

Digitalization at the World Bank

Beyond digital bonds, the World Bank is also exploring DLT's potential to enhance transparency, efficiency, and the digitalization of paper-based processes. One notable area is the application of this technology to pledges made by donor countries to the International Development Association, currently held as promissory notes.

Swiss National Bank's Stance on Retail CBDC

At the same event, SNB Chairman Thomas Jordan addressed the topic of retail CBDCs, which enable individuals to hold and transact in a digital version of their national currency directly with their central bank.

Wholesale CBDC Support, Retail Caution

Despite Switzerland's leading initiatives in CBDC research and development, Jordan expressed skepticism about the need for a retail CBDC in the country. He cited the availability of a robust and innovative private-sector payment system, and emphasized the potential systemic risks and fundamental changes to the monetary system that could result from a retail CBDC.

Global CBDC Landscape

While SNB takes a cautious approach to retail CBDCs, other central banks worldwide are actively pursuing their issuance. Jamaica, the Bahamas, and Nigeria have already launched retail CBDCs, albeit with relatively slow uptake. China, South Korea, Thailand, Russia, Japan, and Australia are among the countries at various stages of CBDC pilot programs.

Conclusion

The World Bank's consideration of a digital bond settled in the digital Swiss franc underscores its commitment to digital innovation in the financial sector. This move, alongside the ongoing exploration of DLT's broader applications, aligns with the institution's long-standing role in promoting financial inclusion and efficiency.

As the global landscape for CBDCs continues to evolve, the World Bank and SNB's respective approaches provide a contrasting perspective on the potential and challenges of these novel digital currencies.