CBDC Integration Settlement Test Successful: BIS

The Bank for International Settlements (BIS) says it has, with the Swiss National Bank (SNB), Six Digital Exchange and five commercial banks, successfully integrated a wholesale central bank digital currency (CBDC) into the banks’ existing back-office systems and processes.

The test took place under the second phase of Project Helvetica, a joint experiment also involving Citi, Credit Suisse, Goldman Sachs, Hypothekarbank Lenzburg and UBS.

The BIS says that integrating a wholesale CBDC into existing core banking systems is complex and a key prerequisite for issuance and that the latest experiment successfully demonstrates that such integration is operationally possible. Issuing a wholesale CBDC on a distributed ledger technology (DLT) platform operated and owned by a private sector company is feasible under Swiss law, it adds.

The experiment was carried out during the fourth quarter of 2021. It explored the settlement of interbank, monetary policy and cross-border transactions on the test systems of Six Digital Exchange, the Swiss real-time gross settlement system – Six Interbank Clearing  – and core banking systems.

BIS says Project Helvetia looks toward a future in which more financial assets are tokenised and financial infrastructures run on DLT. It adds that international regulatory standards suggest that operators of systemically important infrastructures should settle obligations in central bank money whenever practical and available, noting that while none of the existing DLT-based platforms are systemic yet, they may become so in the future. Moreover, it further suggests, central banks may need to extend monetary policy implementation to tokenised asset markets.

To continue fulfilling their mandates of ensuring monetary and financial stability, central banks need to stay on top of technological change,” says Andréa Maechler, member of the governing board of the SNB. “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.”

Benoît Cœuré, head of the BIS Innovation Hub, which manages experiments for the BIS, adds, “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.”