Securities Finance Industry News | BIS, SIX and Swiss central bank finalize CBDC settlement with commercial banks in test environment

BIS, SIX and Swiss central bank finalize CBDC settlement with commercial banks in test environment

The Bank for International Settlements, along with SIX and the Swiss National Bank, have finalized the settlement of a wide range of transactions with commercial banks using central bank wholesale digital currencies (CBDCs).

These transaction settlements, performed in a test environment, demonstrate that it is possible to integrate a wholesale CBDC into existing core banking systems, according to a joint statement from participating entities.

These tests were carried out for a range of CHF transaction types, including interbank, monetary policy and cross-border transactions, using the test systems set up by SIX Digital Exchange, SIX Interbank Clearing, the Swiss system real-time gross settlement and core banking. systems.

The project, labeled Project Helvetia, aims to prepare for a financial future where financial assets are tokenized and financial infrastructures run on distributed ledger technology (DLT). International banking and financial stability standards expect systemically important infrastructures to settle transactions in central bank money whenever possible and available.

Although none of the DLT-based platforms are systemically important at this time, the BIS notes that they must be allowed to settle in the CBDC if they become systemically important in the future.

The Helvetia project assessed the technical and legal feasibility of transferring digital assets by issuing a wholesale CBDC on a DLT platform and linking the digital asset platform to a wholesale payment system. In a statement released on December 3, 2020, project participants indicate that the first phase of this testing initiative has demonstrated the feasibility and legal soundness of these options in a near-live configuration.

Phase II of the project continues the empirical analysis of token asset settlement in the wholesale CBDC that began in Phase I. The second phase of the project is a joint experiment of BIS, SNB, SIX, as well as five commercial banks, namely Citi, Credit Suisse, Goldman Sachs, Hypothekarbank Lenzburg and UBS.

The Helvetia project investigated this use case for a wholesale CBDC for banks and other financial institutions. Project participants make it clear that a retail or general purpose CBDC would address different use cases and have markedly different policy implications.

Benoit Cœuré, Head of the BIS Innovation Hub, says: “We have demonstrated that innovation can be harnessed to preserve the best elements of the current financial system, including central bank money settlement, while potentially unlocking new benefits. As DLT becomes more mainstream, it will become more relevant than ever.

Andréa M Maechler, Member of the Board of Directors of the Swiss National Bank, said: “To continue to fulfill their mission of monetary and financial stability, central banks must remain at the forefront of technological change. The Helvetia project is an excellent example of how to achieve this.

“This allowed the SNB to deepen its understanding of how central bank money safety could be extended to token asset markets.”

The SNB indicates that the Helvetia project is an exploratory experiment and it should not be assumed that the SNB plans to issue a wholesale CBDC.

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