Swiss National Bank Says Wholesale CBDC Eliminates Barriers in Financial Markets

The Swiss National Bank (SNB) is conducting a pilot project that has used wholesale central bank digital currency (CBDC) and successfully settled four tokenized bond issuances and one secondary market transaction.

Project Helvetia III, which was launched in December, is testing tokenized central bank money for wholesale use and allows participating banks to use Swiss franc wholesale CBDC to settle transactions with tokenized bonds on a regulated trading and settlement platform for tokenized assets, SIX Digital Exchange (SDX), Thomas J. Jordan, chairman of the governing board of the Swiss National Bank, said Monday (May 6) in remarks at the BIS Innovation Summit in Basel.

“Settlement in central bank money is crucial for two reasons,” Jordan said in his remarks. “First, it eliminates credit risk and minimizes liquidity risk in settlement, thereby contributing to financial stability. And second, it reinforces the role of central bank money as the anchor for the monetary system.”

By making tokenized central bank money available on the third-party platform where tokenized assets are held, Helvetia III eliminates barriers in the current siloed financial market infrastructures, closely integrates assets and central bank money, reduces the need for synchronization and reconciliation, and facilitates programmability, Jordan said.

The SNB is also testing two other approaches, Jordan said. In one, the tokenized asset platform is linked with the Swiss RTGS system. In the other, private token money is issued on the tokenized asset platform, is bankruptcy-protected, and is fully backed by sight deposits at the SNB.

“If the tokenization of assets becomes mainstream, settlement in central bank money will be crucial,” Jordan said. “This will allow central bank money to maintain its essential role as the anchor of the monetary system and to continue to serve as a safe means of payment.”

Project Helvetia III follows two other pilot projects conducted by the SNB.

One explored the feasibility of integrating a digital asset with a central bank currency. It determined that this offers potential advantages but faces “major” policy hurdles.

Another project integrated digital tokens into back-office systems and processes for five commercial banks. After this pilot, SNB said more financial assets would be tokenized.