By John Revill and Tom Wilson
ZURICH, Jan. 13 (Reuters) – The Swiss central bank has successfully used digital currency to settle transactions involving five commercial banks, the Swiss National Bank announced Thursday, the technology’s latest trial in wholesale markets.
The trial, called Project Helvetia, could bring the introduction of central bank digital currencies closer to Switzerland, which has conducted some of the most advanced central bank digital currency (CBDC) experiments in Europe.
Central banks around the world have stepped up work on CBDCs, in part to make existing payment systems more efficient and to address the challenge of cryptocurrencies, with research focused on versions for wholesale or retail use. .
Under Helvetia, named after the symbol of Switzerland, the SNB integrated CBDCs into payment systems and used them in simulated transactions in the experiment involving UBS, Credit Suisse Goldman Sachs Citigroup and Hypothekarbank Lenzburg.
The program has shown that it is possible to instantly execute payments, ranging in size from 100,000 to 5 million Swiss francs (109,469 to 5.47 million dollars), thus eliminating the counterparty risk.
“We have demonstrated that innovation can be harnessed to preserve the best parts of the current financial system, including settlement in central bank money, while potentially unlocking new benefits,” said Benoit Coeuré, Head of Innovation of the Bank for International Settlements (BIS). Hub, who also participated in the experiment.
The project, which took place over three days towards the end of 2021, also involved Swiss stock exchange operator SIX, the main provider of financial infrastructure services in Switzerland.
This involved the issuance and redemption of wholesale CBDCs as well as their use for payments and for the settlement of securities purchases in Switzerland as well as for cross-border transactions.
It followed on from earlier experiences https://www.reuters.com/article/snb-digitalcurrency/swiss-central-bank-readying-cross-border-digital-currency-test-idUSL1N2MM1UX by SNB, BIS and SIX on using digital currencies https://www.reuters.com/article/swiss-snb-currency-digital/swiss-central-bank-says-wholesale-digital-currency-trial-a-success-idUSZ8N2FE01J.
Central banks around the world have stepped up work on CBDCs, in part to make existing payment systems more efficient, with research focusing on versions intended for both wholesale and retail use.
While retail CBDCs would be used by households and businesses for day-to-day transactions, the wholesale versions could be used to make large-scale payments between banks or other entities with central bank accounts.
Funders say wholesale CBDCs could also make the settlement of securities transactions – which can take days, with multiple parties involved – more efficient.
A CBDC could be programmed with instructions to provide security instantly upon receipt of digital money.
While the central banks of Hong Kong, Thailand and the United Arab Emirates, as well as Singapore, have considered using CBDCs for wholesale cross-border payments, few have examined in detail how a CBDC would be integrated with commercial lenders.
The group involved in Helvetia will now assess the results before deciding on the next steps. ($ 1 = 0.9135 Swiss francs) (Report by John Revill in Zurich and Tom Wilson in London Editing by Matthew Lewis)