Bank for International Settlements (BIS) have successfully tested integration of wholesale CBDC settlement with commercial banks. BIS has done it jointly with the Swiss National Bank (SNB) and SIX (Switzerland’s main provider of financial infrastructure services, which includes five commercial banks i.e Goldman Sachs, Citi, Credit Suisse, Hypothekarbank Lenzburg and UBS).
Exercise is part of second phase of Project Helvetia undertaken jointly by BIS along with SNB and SIX
Under Project Helvetia, experiment was carried out for exploring the settlement of interbank and cross-border transactions. Experiment was conducted during the fourth quarter of 2021 using the test systems of SIX Digital Exchange (SDX), Swiss real-time gross settlement system, SIX Interbank Clearing (SIC) systems and core banking systems.
Project Helvetia is futuristic in nature aiming to create solutions and enabling ecosystem in which financial assets can be tokenised. International regulatory standards have laid down the guidelines for operators of Market Infrastructure which suggest that operators of systemically important infrastructures are required to settle obligations in central bank currency to the extent practical and available. With the adoption of CBDC by Central Banks in near future, It will become imperative for Central Banks to extend monetary policy implementation to tokenised asset markets. Presently existing distributed ledger technology (DLT) platforms are not yet systematic for facilitating full scale implementation
Integration of wholesale central bank digital currency (CBDC) into existing core banking is a key prerequisite for issuance of tokenised assets. However, this system is quite complex but experimentation under Project Helvetia proves that such integration is operationally possible and can be implemented.
Under the Swiss Law it is permissible to conduct the transaction of Issuance of wholesale CBDC on a distributed ledger technology (DLT) platform which is owned and operated by a private sector company.
According to Mr Benoît Cœuré, Head of the BIS Innovation Hub, the experiment has demonstrated the power of innovation in preserving the best element of the current financial system whilst unlocking potential benefit of DLT. He said that DLT will become mainstream with time and will become more relevant.
Ms Andréa M Maechler, Member of the Governing Board of the Swiss National Bank (SNB) has said that central banks need to stay on top of technological change and experiments conducted under project Helvetia has helped SNB to deepen its understanding of how the safety of central bank money could be extended to tokenised asset markets.
According to the report, project has been successful in determining that DLT based infrastructure can integrate as well as interoperate with a range of existing systems and can creating new opportunities in the financial ecosystem. Project Helvetia also demonstrates the potential future involving Settling of tokenised assets in wholesale CBDC. However, each Central Bank has a different policy mandate and may do so may differ depending on the context and mandates.
Bureau Galactik Views