Switzerland extends CBDC trial by 2 years after promising early results

Time:2024-06-27 Source:coingeek 69231 views Trending Copy share

After nearly nine months of experimenting with a wholesale central bank digital currency (CBDC), the Swiss National Bank (SNB) has announced an extension of the pilot to explore new use cases and expand the scope.


In a recent update of its pilot Project Helvetia III, the central bank announced the continuation of the initiative for two more years, keeping its focus on tokenized securities settlement using wholesale CBDCs. Phase 1 of the project ran from late 2023 with a termination date of June 2024, but a fresh two-year extension will see the SNB tinker with CBDCs until 2026.


The first phase yielded a number of actionable results including the central bank describing it as “very successful to date” but a limited scope continues to plague the entire pilot. For the upsides, the pilot indicates promise in settling primary and secondary market transactions using CBDCs and Delivery versus Payment (DvP) settlements.


The extension has since been hailed as a “significant milestone” capable of laying the foundation for increased adoption across the Swiss financial ecosystem. Going forward, the number of firms involved in the pilot is expected to reach double digits from an initial posse of six, including Banque Cantonale Vaudoise, Basler Kantonalbank, UBS (NASDAQ: UBS) and Commerzbank.


“Pioneering the use of wholesale central bank digital currency goes beyond enhancing the efficiency and security of financial transactions,” said SIX CEO Jos Dijsselhof. “This project underscores our commitment to innovation and cements Switzerland’s position at the forefront of digital asset adoption in capital markets.”


The SNB has previously clarified that it is yet to make a final decision on rolling out a wholesale CBDC, hinging its next action on the results of the pilots. Industry sources suggest that the major factors expected to sway the SNB will be issuance volume and adoption levels by players in the financial space.


The SNB will rely on Six Digital Exchange (SDX) for technical support, using its distributed ledger technology (DLT) platform for the pilot studies involving the CBDC.


“Robust and scalable financial market infrastructure requires that wholesale transactions be settled in central bank money, the safest form of money,” said SDX head David Newns. “To fully utilize blockchain’s potential, both the tokenized investment and the settlement asset must be on the same chain.”



Wholesale CBDCs continue to gain traction


While retail CBDCs appear to be hogging all the spotlight, recent developments across the European Union indicate a growing interest in wholesale CBDCs. The Bank for International Settlements (BIS) is proceeding with a series of experiments around the concept of improving cross-border transactions in partnership with several central banks.


For countries staring down the threat of sanctions, wholesale CBDCs are a viable alternative to SWIFT and other global banking systems. A new report stated that nine countries will launch wholesale CBDCs before the end of the decade, with developed economies leading the pack in this regard.

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