Today Swiss stock exchange SIX released more details about its joint wholesale central bank digital currency (CBDC) pilot with the Swiss National Bank (SNB). Tokenized bond transactions on the SIX Digital Exchange (SDX) will be settled using the real wholesale CBDC.
Six commercial banks will participate, including three new SDX members, Commerzbank, Banque Cantonale Vaudoise and Basler Kantonalbank. They join UBS, Hypothekarbank Lenzburg and Zürcher Kantonalbank.The pilot will run from December 2023 until June 2024.
SDX has two conventional Swiss licenses as an exchange and a central securities depository (CSD). Hence it targets institutions only. Last year it hosted the largest digital bond issuance to date, a CHF 375 million bond from UBS. The SDX CSD is linked to the main Swiss CSD, SIX SIS, allowing institutions not yet ready for distributed ledger technology (DLT) to participate in digital bond issuance and trading.
Another new detail is the trial won’t just be for settling digital bond transactions, but also for repo. However, that will be on a test infrastructure, whereas bond settlement will happen in a production environment.
The repo transactions will use SDX-issued digital bonds as collateral, provided they are eligible for SNB repo. Earlier this year, SDX hosted the issuance of a City of Lugano bond, the first digital bond to qualify for SNB repo.
CBDC on a production infrastructure
Until now, SDX transactions have settled using a tokenized Swiss Franc, backed by SIX deposits at the central bank. In that case, SDX managed the node controlling the money. For the pilot, the SNB is the node operator with a wholesale CBDC instead of a tokenized CHF. Talking to Ledger Insights mid year, SDX CEO David Newns emphasized that the system, including payments, is already running in a production environment. Hence, it’s not considerably different, although the legal aspects change somewhat.
The wholesale CBDC pilot is called Helvetia III, following two previous sets of Helvetia trials that also included the BIS.