Today the Swiss National Bank announced it’s participating in a wholesale central bank digital currency (CBDC) trial with the Banque de France, and the BIS Innovation Hub. The solution aims to use the digital Swiss Franc and digital Euro to settle cross border trades for financial instruments such as stock or bonds on a blockchain. The central banks don’t want the tests to be interpreted as a decision to launch a CBDC.
Other participants in the Project Jura trial for cross border settlements are Accenture and its consortium of Credit Suisse, Natixis, R3, SIX Digital Exchange and UBS. These participants are also part of Accenture’s consortium for wholesale digital Euro experiments at the Banque de France. The French central bank created eight consortia in one of the largest central bank digital currency trials to date. Recently it provided a CBDC to settle the public blockchain bond issue by the European Investment Bank.
Using distributed ledger technology enables instant settlement or delivery versus payment (DvP) of a stock trade. This is an atomic transaction, so if one part of the transaction fails, such as transferring the asset or payment, both sides fail. A potential advantage of this sort of trade is it reduces the need for central counterparties who exist to deal with credit risks when transactions fail.
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