The Swiss National Bank (SNB), in collaboration with SIX and six commercial banks, is launching a pilot project focusing on a tokenized digital central bank currency for financial institutions (wholesale CBDC). The Helvetia project is thus entering its third phase.
The Swiss National Bank (SNB) has been experimenting with the possibilities of a digital central bank currency (CBDC) since 2019. Various projects investigated the advantages and disadvantages of a digital franc. As part of the "Helvetia Phase III" pilot project, real Swiss francs wCBDC will be used for the first time for the settlement of digital securities transactions, as detailed in a press release. The project builds on the results of previous Helvetia phases.
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SNB tests wholesale CBDC
Central bank digital currencies (CBDCs) are digital representations of a country's national currency. A distinction is made between retail and wholesale CBDCs. The main difference lies in the intended users and use cases. Retail CBDCs (rCBDCs) are intended for the general public and can be used for everyday transactions, similar to physical cash. Wholesale CBDCs (wCBDC), on the other hand, are primarily intended for financial institutions and facilitate transactions between banks as a digital settlement tool.
In the area of retail CBDCs, the risks currently outweigh the opportunities for the SNB, as Deputy Member of the Governing Board Thomas Moser emphasized in an interview with CVJ.CH. Wholesale CBDCs, on the other hand, remain interesting. The aim of this pilot project is to test the processing of primary and secondary market transactions in wCBDCs in a productive environment. Participating banks will be able to issue digital Swiss franc bonds that are settled with wCBDC on a delivery-versus-payment basis. The Helvetia Phase III project will also be extended to the settlement of repo transactions.
Swiss banking giants take part
Existing SDX member banks are participating in the collaboration, including Banque Cantonale Vaudoise, Basler Kantonalbank, Commerzbank, Hypothekarbank Lenzburg, UBS and Zürcher Kantonalbank. In addition to the SDX platform, the pilot project uses the infrastructure of Swiss Interbank Clearing SIC, which is operated by SIX, and SIX SIS, the national central securities depository (CSD) of the Swiss financial market, as well as an international central securities depository (ICSD). The pilot project is planned for the period from December 2023 to June 2024. An overview of the SNB's past CBDC projects can be found here.
"Switzerland is at the forefront of digital financial innovation. The collaboration between SIX, the Swiss National Bank and six commercial banks to pilot tokenized central bank money is a groundbreaking step. It demonstrates our commitment to the future of digital finance and underlines the transformative power of DLT in the financial system." - Jos Dijsselhof, CEO of SIX