Swiss Advance in Central Bank Digital Money Push

A group of commercial and public institutions got together to see how tokenized financial assets based on distributed ledger technology work with today’s banking systems.

A project involving the Swiss National Bank, the Bank for International Settlements (BIS), the Swiss Securities Exchange SIX and five commercial banks to test the integration of a national digital currency into existing back-office systems and processes, was successful, the central bank said in a statement Thursday.

The banks included in phase II of the project called «Helvetia» were: Citi, Credit Suisse, Goldman Sachs, Hypothekarbank Lenzburg and UBS.

The central bank expects more financial assets to be tokenized in the future with financial infrastructures to run on distributed ledger technology (DLT), it said, while adding that international regulatory standards suggest that operators of systemically important infrastructures should settle obligations in central bank money whenever practical and available.

Tests covered a wide range of transactions in Swiss francs – interbank, monetary policy and cross-border, the statement said.

None of the existing DLT-based platforms are systemic yet, but they may become so in the future, the central bank said, while highlighting the «exploratory nature» of the project.

To continue fulfilling their mandates of ensuring monetary and financial stability, central banks need to stay on top of technological change, head of the BIS Innovation Hub, Benoît Cœuré, said.

Project Helvetia allowed the SNB to deepen its understanding of how the safety of central bank money could be extended to tokenized asset markets, Andréa Maechler, member of the Swiss National Bank’s governing Board said.

While SIX CEO, Jos Dijsselhof, said that the project demonstrated that the SDX platform could support wholesale central bank digital currency (CBDC) for settling tokenized assets end to end.

Separately the UK government published a report on Thursday, which concluded that there was no convincing case for establishing a central bank digital currency (CBDC) at present.

While CBDC may provide some advantages, it could present significant challenges for financial stability and the protection of privacy, the report said. It added that the British government had not yet has not yet decided whether to introduce a CBDC.