Swiss National Bank’s Innovative Digital Currency Project

In a groundbreaking move, the Swiss National Bank (SNB), in collaboration with six leading banks, including one from Germany, embarked on a trailblazing project on 1 December 2023. This initiative introduces a wholesale Central Bank Digital Currency (CBDC) on the regulated SIX Digital Exchange (SDX) platform.

Helvetia Phase III: A New Era in Digital Finance

Dubbed ‘Helvetia Phase III’, this venture marks the SNB’s first issuance of real wholesale CBDC in Swiss francs using Distributed Ledger Technology (DLT) based financial market infrastructure. Transitioning from test environments to production, the SNB is setting a new standard by enabling the settlement of actual bond transactions with wholesale CBDC. The involved banks, including Banque Cantonale Vaudoise, Basler Kantonalbank, Commerzbank, Hypothekarbank Lenzburg, UBS, and Zürcher Kantonalbank, will facilitate these transactions on the DLT platform, acting as intermediaries for issuers and investors. The settlement of tokenised bonds against wholesale CBDC will occur on a delivery-versus-payment basis.

Integrating DLT in Financial Systems

Scheduled to run until June 2024, this pilot with real Swiss franc wholesale CBDC integrates the SDX platform with the SIC infrastructure for central bank money tokenisation and SIX SIS for traditional bond settlement. Additionally, SIX Repo and SDX test systems will explore repo transaction trading and settlement with wholesale CBDC.

The Role of Central Banks in DLT

The integration of DLT and tokenised assets in regulated financial systems promises enhanced efficiency and transparency. Central banks face the challenge of ensuring token transactions between financial institutions are settled in central bank money, maintaining financial system stability and efficiency. The SNB’s pilot adopts a model that issues wholesale CBDC for settling tokenised assets, building on insights from previous Project Helvetia phases.

Testing Various Settlement Models

While this pilot doesn’t guarantee a permanent introduction of wholesale CBDC, it aims to test various models for settling tokenised assets, reflecting the SNB’s commitment to innovation in the CBDC field.

Leadership in Digital Currency Innovation

Thomas J. Jordan, Chairman of the SNB’s Governing Board, highlights the significance of this project: “For years, the SNB has explored wholesale CBDC applications. This pilot, a first of its kind, enables secure and efficient transactions with tokenised assets on a productive DLT platform using real wholesale CBDC. Our collaboration with SIX and the participating banks underscores our leading role in this innovative domain.”

Table: Key Components of the SNB’s CBDC Pilot Project