The investigation of settling tokenized securities using a wholesale central bank digital currency (CBDC) by the Swiss National Bank (SNB) and Swiss Digital Exchange (SDX) is about to move into a new phase. Over the next two years, more financial institutions and transaction types will be added.
Institutional market participants aiming to settle large trading transactions on blockchains are finding that experimentation with CBDC is gaining steam due to interest in tokenization. In addition to the Swiss initiatives, there are initiatives such as Project Agorá, a collaboration between the Bank for International Settlements and other central banks.
The second stage of the deployment comes after Project Helvetia III, which entailed the issuing of seven digital bonds worth a total of more than 750 million francs ($843 million), was completed this month.
According to David Newns, head of SIX Digital Exchange, the project was “a resounding success.” In an interview, Newns stated, “What we’re talking about here is as good as the traditional infrastructure.” Since we’ve reached that level of equivalency for digital securities related to the cash leg, you can use them for repos since they can be included in the collateral market.
An issuer can access the full liquidity base available on a traditional exchange thanks to our bridges into traditional finance.
The project has also caused the number of participating members to treble, and they are now using us to help them achieve their own digital goals. The SNB is solely interested in the digital cash flow from institutions for the settlement of wholesale securities; like many other central banks, it is not interested in testing CBDCs at the retail level.
According to Newns, alternative strategies were taken into consideration, like a trigger mechanism that would activate the central bank’s real-time gross settlement system (RTGS) each time a transaction occurs on a blockchain or a bankruptcy-remote organisation that would keep members’ savings in a 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.