The BIS, the Swiss National Bank and SIX Exchange have concluded a successful CBDC experiment with the participation of some commercial banks.
Switzerland has completed a trial for its wholesale central bank digital currency (CBDC) program. According to the Swiss National Bank, the Swiss CBDC program, dubbed Project Helvetia, involved five major commercial banks. They include Citi, Credit Suisse, Goldman Sachs, Hypothekarbank Lenzburg and UBS.
The Helvetia project was a collaborative effort between several government financial powers in Switzerland. These included the Bank for International Settlements (BIS), the Swiss National Bank (SNB) and the country’s stock exchange, SIX.
The project explored the feasibility of integrating the CBDC Wholesale Regulation. This is part of a network of projects aimed at assisting central banks in rolling out CBDC offerings. In addition, this initiative facilitates interoperability in a global financial network and reinforces progress in cross-border payment.
However, the term “big” here differs from a typical central bank-issued digital currency that retail bank accounts sometimes sport. In June last year, the Swiss National Bank clearly indicated that he had no intention of introducing a digital currency. With the Helvetia project, the focus is on technology that connects financial market infrastructures and streamlines transactions. This creates a conducive environment in which entities can trade or exchange digital cash tokens for tokens representing other financial assets.
BIS Executive Touches Swiss CBDC Initiative
BIS Innovation Hub Head Benoît Cœuré spoke about the CBDC wholesale pilot project. According to Coeure:
“We have demonstrated that innovation can be harnessed to preserve the best parts of the current financial system, including central bank money settlement, while potentially unlocking new benefits. As digital ledger technology [DLT] becomes mainstream, it will become more relevant than ever.
Cœuré also added that the Helvetia project “enabled the SNB to deepen its understanding of how central bank money safety could be extended to token asset markets.”
The Helvetia project has shown that it is possible to execute payments, in an instant, with a huge price range from 100,000 to 5 million Swiss francs (or 109,469 and 5.47 million dollars). With the conclusion, the participating group will evaluate the results of the project to decide on the next course of action. The project took place over three days towards the end of 2021.
US Congressman Doesn’t Want USD CBDC to Happen Despite Growing Efforts by Other Central Banks
The main reason for the efforts made by various central banks with CBDCs is twofold. First, in an ever-changing financial industry, making existing payment systems more efficient is becoming more and more necessary. Second, the particular challenge posed by digital assets makes it necessary for CBDCs for both wholesale and retail use.
However, Minnesota congressman and crypto advocate Tom Emmer wants to stop the Federal Reserve from issuing a CBDC. Emmer filed a law Project at home, where he said it was necessary to preserve the dollar’s status as the world’s reserve currency in the digital age. The congressman also said the US government should act in America’s best interests, instead of competing with the private sector. As he said, “We must prioritize blockchain technology with American characteristics, rather than emulating China’s digital authoritarianism out of fear.”
Tolu is a Lagos-based cryptocurrency and blockchain enthusiast. He likes to demystify crypto stories to the essentials so that anyone, anywhere can understand without too much background knowledge. When not immersed in crypto stories, Tolu loves music, likes to sing, and is a movie buff.