.jpg)
The Bank of International Settlements, along with SIX and the Swiss National Bank, have completed settlement of a wide range of transactions with commercial banks using wholesale central bank digital currencies (CBDCs).
These transaction settlements, conducted in a test environment, demonstrate that it is possible to integrate a wholesale CBDC into existing core banking systems, according to a joint statement by participating entities.
These tests were completed for a range of transaction types in CHF, including interbank, monetary policy and cross-border trades, using the testing systems established by SIX Digital Exchange, SIX Interbank Clearing, the Swiss real-time gross settlement system, and core banking systems.
The project, labelled Project Helvetia, aims to prepare for a financial future where financial assets are tokenised and financial infrastructures run on distributed ledger technology (DLT). International banking and financial stability standards expect that systemically-important infrastructures should settle trades in central bank money whenever this is practical and available.
While none of the DLT-based platforms are systemically-important at this time, the BIS notes that they must be able to settle in CBDC should they become systemically-important in the future.
Project Helvetia has evaluated the technical and legal feasibility of transferring digital assets through issuing a wholesale CBDC on a DLT platform and linking the digital asset platform to a wholesale payment system. In a statement released on 3 December 2020, the project participants indicate the first phase of this testing initiative has demonstrated the feasibility and legal robustness of these options in a near-live set up.
Phase II of the project continues empirical analysis of tokenised asset settlement in wholesale CBDC that commenced in Phase I. The second phase of the project is a joint experiment by BIS, SNB, SIX, along with five commercial banks, namely Citi, Credit Suisse, Goldman Sachs, Hypothekarbank Lenzburg and UBS.
Project Helvetia has examined this use case for a wholesale CBDC which is restricted to banks and other financial institutions. Project participants make it clear that a retail or general purpose CBDC would address different use cases and have markedly different policy implications.
Benoit Cœuré, head of BIS Innovation Hub, says: “We have demonstrated that innovation can be harnessed to preserve the best elements of the current financial system, including settlement in central bank money, while also potentially unlocking new benefits. As DLT goes mainstream, this will become more relevant than ever.”
Andréa M Maechler, member of the Swiss National Bank’s governing board, says: “To continue fulfilling their mandates of ensuring monetary and financial stability, central banks need to stay on top of technological change. Project Helvetia is a prime example of how to achieve this.
“It allowed the SNB to deepen its understanding of how the safety of central bank money could be extended to tokenised asset markets.”
SNB indicates that Project Helvetia is an exploratory experiment and it should not be assumed that the SNB plans to issue a wholesale CBDC.
