Today the BIS Innovation Hub shared the results of Project Jura, the wholesale central bank digital currency (wCBDC) project that involved both the Banque de France and the Swiss National Bank.
Other participants included the SIX Digital Exchange (SDX), Natixis, UBS, Credit Suisse, Accenture, and R3.
The experiment aimed to enable instant settlement of foreign currency transactions as PvP and the use of wholesale CBDC to pay for tokenized commercial paper transactions as delivery versus payment. With immediate settlement and without intermediaries the solution reduces both costs and risk. The transactions are all realistic in that they comply with current regulations.
“Project Jura explores how distributed ledger technology can be successfully leveraged to map out how future-proof cross-border settlement between financial institutions could look like,” said Andréa M Maechler of the Swiss National Bank.
SDX’s test platform hosted the experiment across multiple jurisdictions underpinned by R3’s enterprise blockchain technology.
“Project Jura shows that wCBDC can offer a secure, fast and efficient way to use central bank money in settling international FX and securities transactions on a single production-grade platform – our own SIX Digital Exchange,” said Jos Dijsselhof, CEO of SIX.
Eligible non-resident financial institutions were allowed to hold a foreign currency CBDC. In this case, Credit Suisse and UBS held digital euro at times, and Natixis held digital francs.
How it worked
There were three sub-networks on the SDX test platform: the wholesale digital euro, the wholesale Swiss franc, and a third for the tokenized commercial paper. Natixis both issued and redeemed the commercial paper during the trials, and UBS and Credit Suisse traded it with each other.
On Corda, notaries determine which transactions are written to the ledger. The Swiss National Bank controlled the notary nodes for the Swiss franc, the Banque de France controlled the notary for the digital euro, and SDX controlled the notary for the commercial paper sub-network.
To enable a foreign currency transaction, the notaries on both the digital euro and digital franc network had to agree to any deal. R3 developed a dual notary signing capability to enable this to happen.
The need for a wholesale CBDC
SDX went live with its digital assets platform three weeks ago, issuing a tokenized bond for parent company SIX. To harness the efficiency benefits of blockchain-based transactions, it needs to use cash on ledger. However, so far, the Swiss National Bank has not decided to proceed with a wholesale CBDC. Hence currently, SDX is using its own stablecoin, albeit backed by funds in a central bank account.
Meanwhile, this is not the only multi-currency CBDC or m-CBDC experiment. There’s the M-CBDC Bridge project between the central banks of Thailand, Hong Kong, China and the UAE. And Project Dunbar involves the central banks of Singapore, Malaysia, South Africa and Australia.