The Swiss National Bank (SNB) is continuing its experiments in the field of central bank currencies (CBDCs). "Project Jura" is investigating cross-border payment processing in cooperation with the central bank of France.
The G20 has prioritised the improvement of cross-border and has submitted a multi-year timeline to coordinate efforts in this regard. The current experiment contributes to this work.
"Project Jura" is designed to explore how wholesale CBDCs could increase the speed, efficiency, and transparency of cross-border use cases. The Bank for International Settlements (BIS) supports central bank experiments on public goods in technology.
Experiments by the Swiss National Bank
Project Jura complements the central bank experiments with "Project Helvetia" which studies the effectiveness of CBDCs. It is purely exploratory in nature and, by their own admission, should not be interpreted as an indication of a planned issuance of digital central bank money for financial intermediaries by the Swiss National Bank or the Banque de France.
Further, the consortium also includes the private sector. Major Swiss banks Credit Suisse and UBS, France's Natixis, U.S. crypto consortium R3, and SIX Digital Exchange are teaming up to test cross-border transaction processing.
"It's critical for central banks to keep their finger on the pulse of technological developments. The Swiss National Bank is already exploring the settlement of tokenized assets using wholesale CBDC as part of Project Helvetia. We are pleased to extend this analysis into a cross-border context by participating in this exciting initiative." - Andréa M. Maechler, Member of the Governing Board of the Swiss National Bank
The financial instrument involves the exchange for a euro CBDC on a delivery versus payment (DvP) basis, as well as the exchange of digital euros for a Swiss franc CBDC.
Transactions with euros and Swiss francs
These transactions are settled between banks located in France and in Switzerland. The eurosystem is committed to innovation and adapting its actions to the strong trend toward digitization of payments, according to the central bank of France.
"We are very pleased to launch, together with the Swiss National Bank and the BIS Innovation Hub, an important experiment in cross-border settlement called Jura." - Sylvie Goulard, Vice President Banque de France
The Banque de France believes that digital central bank money has the potential to ensure maximum security and efficiency in financial transactions. It therefore launched a program of experiments last year to make progress in this area.
Reducing friction
Central bank digital currencies (CBDCs) could reduce current frictions in cross-border payments - especially if central banks incorporate an international dimension into the design of their CBDCs from the outset. Based on a survey of 50 central banks in the first quarter of 2021, the Bank for International Settlements (BIS) paper examines initial thinking on the cross-border use of CBDCs.
While most central banks have not yet made a decision on issuing a CBDC, survey responses show a tentative inclination to allow domestic use of a future CBDC by tourists and other non-residents. They are cautious about allowing the use of a CBDC outside their own jurisdiction.
Impact of a CBDC
Concerns about the economic and monetary impact of cross-border use of CBDCs and private sector global stablecoins are being taken seriously. At the wholesale level, 28% of central banks are considering options to make CBDCs interoperable through the formation of multi-CBDC arrangements, according to the BIS survey.
This includes arrangements that improve compatibility, link multiple CBDCs together, or even integrate them into a common payment system. Finally, nearly 14% of respondents are considering an active role for the central bank in currency conversion.
