The Swiss National Bank has succeeded in employing a wholesale central bank digital currency to settle transactions with five commercial banks, the monetary authority announced. The tests are part of an experiment with the Bank for International Settlements and Swiss financial services provider SIX.
Swiss central bank tests SNB wholesale settlement integration with private banks
The Swiss National Bank (SNB) revealed in a press release on Thursday that a wide range of transactions involving wholesale central bank digital currency (CBDC) were processed during the second phase of the Helvetia project.
The trials are being conducted as part of a joint initiative between the Swiss National Bank, the Bank for International Settlements (BIS), and SIX, the main provider of financial infrastructure services in Switzerland. Five commercial banks were also involved – Citi, Credit Suisse, Goldman Sachs, Hypothekarbank Lenzburg and UBS.
The experiment, conducted in the fourth quarter of 2021, explored the settlement of interbank, monetary policy and cross-border transactions on the SIX Digital Exchange (SDX) test systems, the Swiss real-time aggregate settlement system SIX Interbank Clearing (SIC), and the underlying banking systems, in detail The Swiss National Bank.
The Swiss Central Bank and other banks have integrated wholesale central bank digital currency into existing back office systems and operations. The Swiss National Bank notes that in the future, an increasing number of financial assets will be converted to tokens while financial infrastructures will work on distributed ledger technology (DLT). Regulators may need to cover the markets for tokenized assets in their monetary policies, the regulator said and explained:
International regulatory standards suggest that operators of critical system infrastructure should repay their obligations with central bank money whenever possible and available. Although none of the DLT-based platforms exist systemically yet, they may become so in the future.
To continue fulfilling their mandates to ensure monetary and financial stability, central banks need to stay on top of technological changes. Andrea M. Michler, a member of the bank’s board of directors, added that the Helvetia project … allowed the SNB to deepen its understanding of how to extend the security of central bank funds to the token asset markets.
The Swiss National Bank notes that Helvetia is only an exploratory project, indicating that it should not be considered a plan to issue a wholesale CBDC. In December, the Swiss National Bank, along with the Bank of France and the Bank for International Settlements, conducted another experiment, testing the wholesale application of central bank digital currencies for cross-border payments. The Jura DLT project employed and was also realized with the support of private sector companies.
Do you expect the Swiss National Bank to eventually issue a wholesale central bank digital currency? Let us know in the comments section below.
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