The Swiss National Bank (SNB) has been one of the first movers in CBDC exploration, with its Project Helvetia III wholesale CBDC pilot among the most advanced. At a recent industry event, SNB chair Thomas Jordan discussed the bank’s latest achievements, challenges, and some of the alternatives it has considered.
Project Helvetia III launched in December, with the cantons of Basel and Zurich becoming the first to settle a tokenized bond using the wholesale CBDC.
Unlike most CBDC projects, Helvetia III issues the CBDC on a third-party platform operated by the SIX Digital Exchange (SDX), a subsidiary of the country’s largest stock market, SIX.
Speaking at the BIS Innovation Summit in Basel, Jordan revealed that four tokenized bond issuances and one secondary market transaction have been completed since the pilot started last December.
“With wholesale CBDC as piloted in Helvetia III, assets and central bank money are instead closely integrated. This reduces the need for synchronisation and reconciliation and facilitates programmability. This approach aims to realise the benefits of tokenisation,” Jordan said.
He acknowledged that the SNB’s approach has its challenges. The first is governance, which is due to the involvement of a private sector partner in SDX. If it were to issue the CBDC on another private sector platform, fragmentation would emerge as another significant challenge.
SNB has considered other approaches to combat the challenges, including linking the tokenized asset with the Swiss RTGS system and using private token money issued on the tokenized asset platform. Jordan revealed that both are legally and technically feasible, and SNB carefully weighs its options.
The central bank is also monitoring tokenization. If it goes mainstream, the bank’s role will be to ensure the efficient settlement of central bank money.
While tokenization shows great promise, the SNB is proceeding cautiously and is currently working with market participants to find the best way to support innovation while protecting the role of central bank money.
“The world’s first issuance of wholesale CBDC on a regulated third-party platform underscores our commitment to facilitating technical progress while acting prudently and responsibly,” Jordan stated.
At the Innovation Summit, other European central bank governors took to the stage to voice their support for the digital euro. Deutsche Bundesbank’s Joachim Nagel stated that blockchain and CBDCs could save the central banks’ business models, while Italy’s Fabio Panetta favored a wholesale CBDC.
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
Watch: Deploying CBDCs on the original Bitcoin
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