SNB Moves to Phase III of Project Helvetia
Posted by Colin Lambert. Last updated: November 5, 2023
The Swiss National Bank (SNB) has announced that on 1 December 2023, it will launch phase III of Project Helvetia, its central bank digital currency (CBDC) pilot, which will see it launch, for the first time, real wholesaleable CBDC in Swiss francs.
The issuance will take place on the SIX Digital Exchange, and six commercial banks, Banque Cantonale Vaudoise, Basler Kantonalbank, Commerzbank, Hypothekarbank Lenzburg, UBS and Zürcher Kantonalbank, will also take part in the latest pilot. Helvetia III also marks the first issuance by the SNB of a Swiss franc CBDC on a financial market infrastructure based upon distributed ledger technology (DLT).
The SNB says the latest phase of the project moves its work from test environments into production by making wholesale CBDC available for the settlement of real bond transactions. The banks involved will carry out the transactions on the DLT platform as intermediaries for issuers and investors. The tokenised bonds will be settled against wholesale CBDC on a delivery-versus-payment basis.
The pilot is scheduled to run to June 2024, and the SNB says that in addition to the SDX platform, the pilot project will use the Swiss Interbank Clearing (SIC) infrastructure for the tokenisation of central bank money and that of SIX SIS for integration with the traditional bond settlement infrastructure. Furthermore, SIX Repo and SDX test systems will be used to explore the trading and settlement of repo transactions with wholesale CBDC.
The SNB observes that DLT and tokenised assets are already being used in some areas of the regulated financial system, “where they promise to deliver efficiency gains and greater transparency”. It adds, ‘If DLT establishes itself in the financial system, the question for central banks is how token transactions between financial institutions can be settled in central bank money. Central bank money, which poses no counterparty risk, could thus continue to play its key role in maintaining the stability and efficiency of the financial system.”
In March 2023, the SNB announced that it would examine three models for settling the cash leg of tokenised asset transactions. One model involves the issuance of wholesale CBDC for settling tokenised assets; another involves the linking of settlement systems for tokenised assets with the existing SIC payment system; and a third involves the use of private, bankruptcy-protected token money that is backed by central bank money. The upcoming pilot project adopts the first model, for which the SNB will be able to build on the findings of earlier Project Helvetia phases.
The central bank is keen to stress that the pilot does not constitute a commitment on the part of the SNB to introduce wholesale CBDC on a permanent basis. Rather, the SNB aims to test the various models for settling tokenised assets.
“For several years now, the SNB has been testing a variety of potential applications for wholesale CBDC,” says Thomas Jordan, chairman of the Swiss National Bank’s governing board. “Together with our partners, we have already been able to make important contributions to research in the CBDC field. With this pilot project, we are now, for the first time, making it possible to securely and efficiently settle transactions with tokenised assets on a regulated and productive DLT platform using real wholesale CBDC. We are proud of our internationally pioneering role in this area as we carry out this innovative project together with SIX and the participating banks.”