Project Helvetia successfully tests wholesale CBDC settlement with banks

Project Helvetia, a joint initiative between The Bank for International Settlements’ Innovation Hub (BISIH) Swiss Centre, the Swiss National Bank (SNB) and the financial infrastructure operator SIX, has reached the conclusion that a wholesale central bank digital currency (CBDC) is compatible with existing core banking systems and processes of commercial and central banks.

Issuing a wholesale CBDC on a distributed ledger technology (DLT) platform operated and owned by a private sector company is operationally and legally feasible under Swiss law.

These are the main conclusions of the second phase of Project Helvetia, which also included five commercial banks: Citi, Credit Suisse, Goldman Sachs, Hypothekarbank Lenzburg and UBS.

The experiment was carried out during Q4 2021. It tested the settlement of interbank, monetary policy and cross-border transactions on the test systems of SIX Digital Exchange (SDX), the Swiss real-time gross settlement system – SIX Interbank Clearing (SIC) – and core banking systems.

Project Helvetia looks toward a future in which more financial assets are tokenised and financial infrastructures run on DLT.

International regulatory standards suggest that providers of systemically important infrastructures should settle obligations in central bank money whenever practical and available.

While none of the existing DLT-based platforms are systemic yet, they may become so in the future. Moreover, central banks may need to extend monetary policy implementation to tokenised asset markets.

“We have demonstrated that innovation can be harnessed to preserve the best elements of the current financial system, including settlement in central bank money, while also potentially unlocking new benefits,” comments Benoît Cœuré, Head of the BIS Innovation Hub. “As DLT goes mainstream, this will become more relevant than ever.”

“To continue fulfilling their mandates of ensuring monetary and financial stability, central banks need to stay on top of technological change,” continues

Andrea M Maechler, member of the SNB’s Governing Board.

“Project Helvetia is a prime example of how to achieve this. It allowed the SNB to deepen its understanding of how the safety of central bank money could be extended to tokenised asset markets.”

As an experiment, Project Helvetia is of an exploratory nature and should not be interpreted as an indication that the SNB plans to issue a wholesale CBDC. Phase II continues the exploration of tokenised asset settlement in wholesale CBDC that was started by Project Helvetia Phase I in 2020.

Read the full report: Project Helvetia Phase II – settling tokenised assets in wholesale CBDC.