The Swiss National Bank has successfully completed a proof-of-concept study for the use of central bank digital currency in connection with the financial market infrastructure. Now, the project will move into its second phase.

«Project Helvetia» is the name of a landmark study on the feasibility of central bank digital currency in Switzerland. The future use of the distributed ledger technology (DLT) by financial market participants forces the Swiss National Bank (SNB) to evaluate its toolbox as the institution enjoys a key role in the interaction between state and private actors.

In the first, now completed phase of «Project Helvetia», the SNB together with Swiss stock-market operator SIX studied the technical feasibility for the use of a so-called wholesale CBDC, the digital currency for financial-market participants in the context of the innovation hub at the Bank for International Settlements (BIS).

SDX: Next Generation Technology

The project presented on Thursday was deemed a success by all participants – issuing a novel wholesale central bank digital currency or settling tokenized assets was confirmed as realistically possible.

The second part of the first project phase was equally successful, namely the building of a link between the new securities settlement platform of SDX and the existing central bank payment system.

SIX, which is the driving force behind the SDX project, was not present at today's virtual presentation of «Project Helvetia», but enjoys a central position in terms of the development of the technology and infrastructure. SIX intends to launch the SDX platform in 2021, which will give the Swiss digital financial system a massive boost.

Public and Private Partnership

The project managers acknowledged explicitly the key role of the private sector in the development of tokenization of assets and the digital ledger technology. The money and effort spent on these technologies have put the central banking community under pressure to ensure that they can fulfill the mandate to guarantee the safe and efficient functioning of the financial market.

Therefore, the BIS took the lead in projects such as «Helvetia» to make sure that vital findings will be shared across the globe. Adding to the three existing innovation hubs of Basel, Hong Kong, and Singapore, BIS will open new hubs in London, Toronto, Stockholm, and Frankfurt/Paris. The BIS furthermore has an agreement with the Federal Reserve for a hub in New York.

The «Njet» for an E-Franc Stands

While the project may have proven the validity of the technology available, it doesn't mean that the central bank of Switzerland will soon commit to launching CBDC, and, what's more, it doesn't mean at all that the bank will introduce an e-franc for general use.

Before the bank moves on to implement a strategy for the financial market and a wholesale CBDC, the bank will want to study further the questions including expected efficiency gains, as well as operating, legal and regulatory issues, according to Andréa Maechler, member of the SNB's monetary policy committee. The second phase of «Project Helvetia», already underway, will attempt to look into the many remaining questions and find answers to the question of how monetary policy might be affected. The second phase is due to be completed in the third quarter of 2021.

Meanwhile, Maechler confirmed that the e-franc for all remained of the bank's wishlist, because of the risk to the two-tier banking system and because the currently used cashless payment systems worked perfectly well.