Swiss National Bank and SDX Delve Deeper Into CBDCs, Tokenized Securities

As a researcher with a background in fintech and central banking, I’m excited about the extension of the SNB and Swiss Digital Exchange’s exploration of wholesale CBDCs for another two years. The successful completion of Project Helvetia III, which involved the issuance of seven digital bonds worth over 750 million francs ($843 million), is a significant milestone in this space.

The collaboration between the Swiss National Bank (SNB) and Swiss Digital Exchange (SDX) on experimenting with settling tokenized securities via a wholesale central bank digital currency (CBDC) is progressing into a new stage. In this phase, more financial institutions and various types of transactions will be incorporated over the next two years.

Central banks’ exploration of CBDCs (Central Bank Digital Currencies) is gaining traction among institutional investors due to the potential of tokenization in executing large-scale financial transactions on blockchain technology. Notably, initiatives such as Project Agorá, a collaboration between several central banks and the Bank for International Settlements, are further fueling this momentum.

After the successful completion of Project Helvetia III this month, which issued over 750 million francs ($843 million) worth of digital bonds in seven transactions, the next stage will begin.

In an interview, Newns expressed that the digital securities we’re discussing offer equivalent value to traditional infrastructure. We’ve managed to make these securities eligible for collateral markets, allowing them to be used for repurchase agreements (repo). Furthermore, we have connections to conventional finance, enabling issuers to tap into a vast liquidity pool available on traditional exchanges. Consequently, our project has attracted an increased number of members who are utilizing our platform as a means to advance their digital objectives.

The SNB, like several other central banks, focuses solely on the digitization of institutional transactions for wholesale securities settlement in CBDCs, rather than exploring retail experiments.

Newns proposed alternative methods for integrating blockchains with central bank systems. One idea was implementing a trigger mechanism in real-time gross settlement (RTGS) systems, causing an event each time a transaction occurs on the blockchain. Another suggestion involved establishing a bankruptcy-proof entity that would secure members’ deposits using some form of stablecoin.

As a researcher, I’ve observed that while various forms of currency and assets exist, none compare to the effectiveness and preference of central bank money in settling transactions.