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The interviewee, who explicitly wished to remain anonymous, is an economic advisor at a major Swiss financial institution. In the past, he has written extensively about the sys-temic risks inherent to quantitative easing, especially those around asset price inflation and the mortgage market. These include inflationary pressures from the flattening of the yield curve and a lower rate environment, as well as the effect that this can have on the velocity of money. Most recently, he has authored around the central bank risk transfer that CBDCs can create. As part of this current research, the interviewee has assessed and made sugges-tions around how the issuance of a retail CBDC could lead to an expansion of the central bank balance sheet. An expansion of this kind would be driven by greater demand for consumer and retail access to low risk deposits, which in turn could create substantial changes to the risk profile of the central bank portfolio (Anonymous, personal commu-nication, 11 March, 2022). With this in mind, it is incumbent on any responsible actor to first carefully consider the second-order effects and risk factors that the mass adoption of retail CBDC deposits could present. 5.2.2. Approach to CBDC It is the interviewee’s opinion that all central banks, but in particular those with foreign exchange holdings and that experience higher foreign demand, are acutely aware of the fact that disrupting the payment system could lead to a transfer of risk from private to public sector (Anonymous, personal communication, 11 March, 2022). Such a risk shift is to be avoided wherever possible, and to this effect the interviewee’s research differentiates between the substitutability of CBDC for central bank issued cash versus privately issued deposits. During a CBDC rollout and implementation phase, the increase of demand for either of these classifications of money is not perfectly linear. In addition, the demand profile is heterogenous between central banks based on the level of economic and sectoral development of their national economies. Taking the Swiss case of a high-income economy with a fully banked population, the great risk is that most of the substitution will be of private money from bank deposits into CBDC (Anon-ymous, personal communication, 11 March, 2022). The effective interest rate differential between private bank accounts and direct retail CBDC accounts will also be necessary in determining the level of demand for CBDC. Cru-cially, CBDC will also be able to implement steerable interest rates directly onto public money which cash is unable to do. The actual rate of interest would be unaffected by this mechanic though, since policy rates are based on interbank lending with hedged risk on swap rates, rather than directly based on the desired yield of a CBDC. From a central bank’s perspective, the minimal effect of a retail CBDC on interest rates is rela-tively insignificant compared to the potential for increased capital inflows. Rather than seeking higher yields, there is the potential that foreign investors will instead see a retail CBDC as a further opportunity to access a safe haven currency devoid of market risk (Anonymous, personal communication, 11 March, 2022). Irrespective of real interest rates, in the short-term wholesale CBDCs are much more pertinent to the effective management of any additional maturity or credit risk that cen-tral banks might need to take on. Beyond foreign denominated risk, the larger issue for a central bank trying to take a macroprudent approach to direct market intervention is that wCBDCs could be seen as a much more preferable counterparty than the interbank short term money market in times of systemic shocks that have in the past caused an interbank credit crunch. Like in 2008, this could result in the central bank having a large amount of credit risk bearing collateral such as mortgages and other illiquid assets be-ing posted by counterparties in financial distress. Naturally, it is the public sector’s pref-erence that such transactions be carried out on the interbank market at a premium for profit, as is presently the case. 5.2.3. Current Status In the Swiss case we can differentiate between the status of retail CBDCs, which are cur-rently not under consideration, and wholesale CBDCs, which are being trialled as part of projects Helvetia, Jura, & Rio. At present, Switzerland has no intention to introduce a retail CBDC yet, if at all. For the immediate future there are no retail or account-based consumer payment prototypes, proofs of concept or research avenues being pursued around the introduction or rollout of CBDCs over the medium term. By contrast, Switzerland is actively pursuing proto-types of wholesale CBDC that could help to digitise the existing central bank repo money market, as well as allowing for a more direct and transparent involvement in the cross-border settlement of transactions.

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