Swiss National Bank Partners with Leading Banks for Wholesale Digital Currency Pilot

In a significant development for the world of Central Bank Digital Currencies (CBDCs), the Swiss National Bank (SNB) has launched a pilot project with six commercial banks to explore the utility of wholesale central bank digital currency (CBDC) on the distributed ledger technology (DLT) platform.

This project, dubbed “Helvetia Phase III,” signifies a crucial move by the SNB from test environments into a production setting, where real Swiss franc wholesale CBDC will be used for the settlement of bond transactions on the SIX Digital Exchange (SDX). The banks involved, including Banque Cantonale Vaudoise, Basler Kantonalbank, Commerzbank, Hypothekarbank Lenzburg, UBS, and Zürcher Kantonalbank, will operate as intermediaries for issuers and investors, settling tokenized bonds using wholesale CBDC on a delivery-versus-payment basis.

The pilot, scheduled to run from December 2023 to June 2024, is a significant step towards understanding how DLT and tokenized assets can enhance efficiency and transparency in the financial system. The successful implementation of DLT could provide a means for central banks to facilitate token transactions among financial institutions, with settlements backed by central bank money, ultimately contributing to the stability and efficiency of the financial system.

This move follows the SNB’s announcement in March 2023, where they outlined three models for settling the cash leg of tokenized asset transactions. The first model involves the issuance of wholesale CBDC to settle tokenized assets, and it is the model chosen for this pilot project. The lessons learned from earlier Project Helvetia phases are invaluable in shaping the implementation of this CBDC pilot.

It is important to note that the SNB’s pilot project should not be viewed as a firm commitment to permanently introduce wholesale CBDC. Instead, the SNB aims to evaluate various models for settling tokenized assets and assess their viability in a real-world financial ecosystem.

As SNB Chairman Thomas J. Jordan emphasizes, “For several years now, the SNB has been testing a variety of potential applications for wholesale CBDC. 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.”

The introduction of wholesale CBDC into the financial system could have far-reaching implications for the industry, ushering in greater efficiencies and transparency. As this pilot project unfolds, it will serve as a litmus test for the broader adoption of CBDCs across the global financial landscape. The outcome of this ambitious endeavor could significantly shape the future of digital currencies and the financial ecosystem as a whole.