Swiss National Bank and SDX Delve Deeper Into CBDCs, Tokenized Securities

• The SNB and SIX Digital Exchange are extending their exploration of wholesale central bank digital currencies for two more years.
• The now-completed Project Helvetia III involved the issuance of seven digital bonds, totaling more than 750 million francs ($843 million).

The Swiss National Bank (SNB) and SIX Digital Exchange (SDX) exploration of settling tokenized securities through a wholesale central bank digital currency (CBDC) is entering a new phase that will see other financial institutions and types of transactions added over the coming two years.

Interest in tokenization is adding momentum to CBDC experimentation for institutional market participants looking to settle big trading transactions on blockchains. As well as the Swiss efforts, there are moves like Project Agorá, which involves a number of central banks and the Bank for International Settlements.

The next phase of the deployment follows the completion this month of Project Helvetia III, which involved the issuance of seven digital bonds totaling more than 750 million francs ($843 million) and was “a resounding success,” according to David Newns, head of SIX Digital Exchange.

“What we’re talking about here is as good as the traditional infrastructure,” Newns said in an interview. “Now we've achieved that sort of equivalence for digital securities around the cash leg, these are eligible for inclusion in the collateral market so you can use them for repo. We have bridges into traditional finance, so an issuer can reach that entire liquidity base you get on a traditional exchange. And as a result of the project, participating members have now tripled, and are using us as a way to further their own digital ambitions.”

Like many other central banks, the SNB is not interested in retail CBDC experimentation, only the digital cash flow from institutions for wholesale securities settlement.

Newns said other approaches were considered, such as a trigger mechanism in the real-time gross settlement system (RTGS) of the central bank every time a transaction takes place on a blockchain, or a bankruptcy-remote entity holding members' deposits in some kind of stablecoin.

“But nothing really works like central bank money does, which is why it is the settlement asset that everyone prefers to use whenever possible,” Newns said.