The Swiss National Bank and five other giant banks informed they managed to integrate CBDCs into the banking systems.
Switzerland’s Central Bank has successfully performed a digital currency trial run to settle transactions with five participating commercial banks. The bank believes the initiative could introduce central bank digital currencies a step nearer in Switzerland, which has conducted some of the most advanced central bank digital currency (CBDC) experiments in Europe. According to the press release by the Swiss National Bank, the latest test run, called Helvetica, was on the wholesale CBDC market.
The test runs aimed at the finer details around issuing wholesale central bank digital currencies. A report by Bloomberg stated that the Swiss National Bank (SNB) collaborated with five commercial banks to facilitate the trials. The participating commercial banks included Citigroup Inc., UBS Group AG, Goldman Sachs Group Inc., Credit Suisse Group AG, and Hypothekarbank Lenzburg AG.
How exchanges could integrate CBDC functions
According to the SNB, the existing cryptocurrency platforms were not systemic to support central bank digital currency settlements. Accordingly, the trial run was meant to determine how those exchanges could integrate CBDC functions. Andrea Maechler – Governing Board Member of the Swiss National Bank – stated:
“It allowed the SNB to deepen its understanding of how the safety of central-bank money could be extended to tokenized asset markets.”
Despite having carried out a successful trial run, the team didn’t reveal when the next step of “Project Helvetica would launch.” However, more issues such as cybersecurity and processing large transaction volumes are yet to be addressed.
Preserve the best elements of the current financial system
The trial run revealed that it was possible to instantaneously execute payments, which ranged in size from 100,000 to 5 million Swiss francs ($109,469 to $5.47 million), eliminating counterparty risk. Benoit Coeuré, head of the Bank for International Settlements (BIS) Innovation Hub, which also took part in the experiment, said:
“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.”
Integration is operationally possible
Project Helvetia is projected to delve into a future where more financial assets are digitalized, and financial infrastructure runs on blockchain and distributed ledger technology (DLT). Currently, none of the existing DLT-based platforms are systemic yet. They may become so in the future. Moreover, central banks may need to implement monetary policy to tokenized asset markets. Integrating a wholesale central bank digital currency (CBDC) into existing core banking systems is complex and essential for issuance. Under Swiss law, issuing a wholesale CBDC on a distributed ledger technology (DLT) platform operated and owned by a private sector company is feasible. Phase II of Project Helvetia demonstrates that such integration is operationally possible.
Tom is a freelance writer with over 10-years’ experience in content creation, blog writing, and SEO specializing in the blockchain and cryptocurrency niche. As a philosophical figurehead, he believes that to make our world a better place, we must invest in incorruptible products and procedures, of which Bitcoin and other cryptocurrencies are leading examples.
