Extension of Swiss CBDC Pilot Program
The Swiss National Bank (SNB) announced on June 20 an expansion of its wholesale central bank digital currency (CBDC) pilot program, known as the “digital franc.”
The extension aims to include more financial institutions while assessing the digital franc’s performance and security in real-world scenarios.
Swiss CBDC Pilot Delayed
Antoine Martin, a member of the SNB governing board, disclosed that Switzerland has postponed the initial pilot date from June 30 by roughly two years, setting a new timeline for at least 2026.
The focus of the Swiss CBDC pilot is on wholesale applications, intended for transactions between financial institutions rather than retail consumers. This approach contrasts with retail CBDC pilots in countries like China, where the digital yuan is designed for public use.
Martin noted that the wholesale CBDC “can be made available for a wider range of financial transactions.” Currently, the pilot involves six commercial banks, including UBS Group AG and Commerzbank AG, in collaboration with Swiss stock exchange provider SIX.
Today's #Fintech Digest includes the Swiss National Bank (SNB) continuing its Project Helvetia pilot focusing on tokenized securities settlement on SIX Digital Exchange (SDX) in Swiss franc wholesale #CBDC for at least two more years. https://t.co/sIZD0i3wQI pic.twitter.com/oiJLqiUexq
— John Kiff (@Kiffmeister) June 20, 2024
Key Factors for Success
Martin identified two critical factors for the project’s success: attracting new financial market participants and increasing transaction volume. He also stressed the importance of settling more financial market transactions on the platform.
However, Martin warned that this extension does not ensure the permanent introduction of wholesale CBDC or digital SNB Bills.
Testing and Utility of the Digital Franc
The digital franc has shown some practical utility during its testing phase. For instance, the SNB has issued blockchain-based digital currency for institutional use, enabling financial institutions to use the tokenized asset for transactions with the central bank.
The digital franc has also been used to settle at least five bond issuances on SIX’s digital exchange in Zurich. A significant milestone was achieved with a $226 million settlement for a World Bank bond earlier this month.
The Role of BIS Innovation Hub in CBDC Development
The Bank for International Settlements (BIS) is a major player in advancing global CBDC initiatives. Through its Innovation Hub, the BIS facilitates collaboration among central banks worldwide, driving research and development in digital currencies and financial technology innovation.
In 2021, the Swiss National Bank, the Banque de France, and the BIS Innovation Hub launched Project Jura to focus on wholesale CBDCs (wCBDCs) for cross-border settlements.
Global Collaboration on CBDC Prototypes
Project Dunbar unites multiple central banks to develop prototypes for a shared platform, enabling international settlements using multi-CBDCs.
In January 2024, the BIS announced a new phase for its CBDC project. The Aurum Project investigates the privacy of payments in retail CBDCs. This is one of six projects for 2024 under the Innovation Hub work program.
Multi-CBDC Platforms and Cross-Border Payments
The BIS is also working on Project mBridge, a multi-CBDC platform for wholesale cross-border payments. This follows the Central Banks of China and the United Arab Emirates (UAE) signing a MoU to enhance digital currency cooperation.
Another significant initiative is Mariana, a collaboration between the central banks of France, Singapore, and Switzerland. The Mariana project explores using automated market makers (AMMs) for wholesale CBDC transactions across borders, utilizing decentralized finance (DeFi) technologies to revolutionize cross-border payments.
