BIS Wholesale CBDC Proof-of-Concept in Collaboration with SNB and SIX was A Success
The Bank of International Settlements (BIS), Swiss National Bank (SNB), and SIX Digital Exchange has completed a wholesale CBDC proof-of-concept (PoC), which tested the integration of a CBDC with tokenized assets and the feasibility of linking existing payment networks with Digital Ledgers (DLTs).
As earlier reported by BEG, the SNB and BIS were planning to launch a PoC CBDC by the end of 2020; it seems the duo is on track given the latest updates. Dubbed project ‘Helvetia,’ this initiative tested the technical and legal feasibility of integrating digital assets via a CBDC or linking current networks with DLT ecosystems. The press release reads,
“Project Helvetia shows the feasibility of two proofs of concept (PoCs), using “near-live' systems to settle digital assets on a distributed ledger with central bank money … The collaboration sets the stage for further joint experimentation to assess the impact of digital innovation on the future of the financial system.”
Switzerland, which has long been an international financial hub, is looking to capitalize on the benefits of DLTs to further increase its attractiveness as a haven. SNB’s governing board member, Andréa M Maechler, noted that the SNB is prepared to embrace DLT if this means a better financial ecosystem,
“Irrespective of which technologies the financial markets adopt next, the safety and reliability of Swiss financial infrastructure must be preserved. If DLT can deliver significant improvements in securities trading and settlement, then the SNB will be prepared.”
Pros and Cons for both PoCs
Following the PoC tests, this initiative revealed that both a wholesale CBDC or linking existing payments with DLTs come with pros and cons. The former provides a seamless avenue for settling digital assets but is likely to raise significant governance and policy challenges. As for the integration approach, policy implications are minimal, although stakeholders would have to forego the perks of fully integrating with DLT networks.
Nonetheless, this milestone set the stage for further practical CBDC research according to the head of BIS Innovation Hub (BISIH), Benoît Cœuré,
“If wholesale CBDCs are to fulfill their potential as a new means of settlement, their design and implications deserve close study and consideration. This is only possible via continued deliberations and experimentations among central banks and with other stakeholders, such as market supervisors and the private sector.”
The press release was keen to point out that this innovation is only a PoC test and should be interpreted that the SNB will issue a wholesale CBDC or facilitate exchange clearing through DLT. Meanwhile, other jurisdictions, including Canada, have recently signaled a keener interest in the CBDC developments to hedge for a virtual monetary future.