The Swiss National Bank (SNB) – together with six commercial banks – will start a pilot project with central bank digital currency (CBDC) for financial institutions, referred to as wholesale CBDC. It will be on the regulated platform of SIX Digital Exchange (SDX).
With this pilot, called Helvetia Phase III, the SNB will for the first time issue real wholesale CBDC in Swiss francs on a financial market infrastructure based on distributed ledger technology (DLT). The SNB is thus moving its work from test environments into production and is making wholesale CBDC available for the settlement of real bond transactions.
The banks involved will carry out the transactions on the DLT platform as intermediaries for issuers and investors. The tokenized bonds will be settled against wholesale CBDC on a delivery-versus-payment basis. The pilot with real Swiss franc wholesale CBDC is scheduled to run from December 2023 to June 2024.
The participating banks are Banque Cantonale Vaudoise, Basler Kantonalbank, Commerzbank, Hypothekarbank Lenzburg, UBS and Zürcher Kantonalbank. In addition to the SDX platform, the pilot project will use the Swiss Interbank Clearing (SIC) infrastructure for the tokenization of central bank money and that of SIX SIS for integration with the traditional bond settlement infrastructure.
Furthermore, SIX Repo and SDX test systems will be used to explore the trading and settlement of repo transactions with wholesale CBDC. DLT and tokenized assets are already being used in some areas of the regulated financial system, where they promise to deliver efficiency gains and greater transparency. If DLT establishes itself in the financial system, the question for central banks is how token transactions between financial institutions can be settled in central bank money. Central bank money, which poses no counterparty risk, could thus continue to play its key role in maintaining the stability and efficiency of the financial system.
“For several years now, the SNB has been testing a variety of potential applications for wholesale CBDC. Together with our partners, we have already been able to make important contributions to research in the CBDC field. With this pilot project, we are now, for the first time, making it possible to securely and efficiently settle transactions with tokenized assets on a regulated and productive DLT platform using real wholesale CBDC,” said Thomas Jordan, chair of the Swiss National Bank’s Governing Board, in a statement.