The Swiss National Bank (SNB) is proceeding with a new pilot for its central bank digital currency (CBDC), focusing on interbank transaction settlements in primary and secondary markets.
The SNB’s wholesale CBDC pilot onboards commercial banks, including UBS, Zurcher Kantonalbankk, Commerz Bank, Hypothekarbank Lenzburg, and Banque Cantonale Vaudoise. The pilot, dubbed Helvetia Phase III, builds on two previous studies with collaborations from the Bank for International Settlements (BIS) and the SIX Digital Exchange (SDX).
In a statement, it appears the BIS will not be playing a role in the pilot’s third iteration, but SNB will be leaning on SDX for technical direction. SDX will host the studies on its distributed ledger technology (DLT)-based platform while doubling as a “trusted gateway” for the pilot’s participants.
“The pilot’s objective is to test, in a live production environment, the settlement of primary and secondary market transactions in wCBDC,” said the SDX. “Participating banks will be able to issue digital Swiss Franc bonds, which will be settled against wCBDC on a delivery-versus-payment basis.”
The latest iteration of the wholesale CBDC pilot will see it deployed in digital securities transactions after showing glimpses of promise in previous studies. Going forward, Helvetia Phase III will test the viability of CBDCs in repo transactions with the bank using digital bonds to collateralize the transactions.
“Switzerland has taken a leading role in this technological evolution, with SIX, SDX specifically and our members and in collaboration with the SNB at the forefront,” said SDX Executive David Newns. “This ground-breaking initiative is poised to open a new era of digital finance and shape the trajectory of the global financial industry.”
The European nation has been making significant inroads with tokenization in finance, leveraging collaborations with Japan’s Financial Services Agency (FSA), the U.K.’s Financial Conduct Authority (FCA), and the Monetary Authority of Singapore (MAS). Reuters reported the pilot is expected to start sometime in December and run till the middle of 2024.
Wholesale CBDCs march on
Despite the leaps recorded by retail CBDCs, wholesale CBDC research is making significant progress in its own right, with central banks and commercial banks throwing their weight behind the offering.
Global banking regulators are eyeing the prospects of improved cross-border and foreign exchange (FX) transactions using wholesale CBDCs.
The BIS experiment Project Mariana recorded a slew of positives from using wholesale CBDS with France, India, and Russia exploring the concept. Enthusiasts argue that wholesale CBDCs could offer a worthy alternative to the SWIFT banking system, saving time and costs associated with international interbank transactions.
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: How CBDCs on Bitcoin should work
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