Banking Capital markets News

SIX Digital Exchange CBDC trials include UBS, Credit Suisse, Citi, Goldman

swiss franc cbdc

Today the Bank for International Settlements (BIS) published the results of a wholesale central bank digital currency (wCBDC) experiment by the Swiss National Bank (SNB), Project Helvetia Phase II. The research was conducted with the Swiss stock exchange SIX on a test version of its blockchain-based SIX Digital Exchange (SDX) network, the regulated digital asset platform. The central bank has not decided to issue a wholesale CBDC that is only available to banks, not consumers.

A key objective of the tests was to enable interoperability between the DLT solution and existing banking systems at both the central bank and commercial banks. 

Five commercial banks were involved in the experiments, Citi, Credit Suisse, Goldman Sachs, Hypothekarbank Lenzburg and UBS. Plus, it integrated with Swiss real time gross settlement (RTGS) system SIX Interbank Clearing (SIC) as well as the banks’ core banking systems. 

“We have demonstrated that innovation can be harnessed to preserve the best elements of the current financial system, including settlement in central bank money, while also potentially unlocking new benefits,” said Benoît Cœuré, the outgoing Head of the BIS Innovation Hub. Cœuré has been confirmed as the next head of France’s competition regulator. “As DLT goes mainstream, this will become more relevant than ever,” he added.

The trial involved interbank transactions, including settlement for digital asset trades. Additionally, the central bank tested monetary policy and cross-border transactions – last year, a separate report was published on trials with the Banque de France.

In this case, the central bank issued the Swiss Francs directly onto the test SDX platform, where SIX was in control of the notary nodes, but the central bank made decisions. It was also an overnight wCBDC which means that transactions could continue 24/7. However, clearly this creates challenges when integrating with existing systems.

While Switzerland seems far advanced with its tests, the report highlighted a number of hurdles to overcome for a tokenized market infrastructure. Many of them are because incumbents are not starting with a clean sheet and have to integrate with existing systems.

A specific issue raised was the complexity for both the central bank and commercial banks if CBDC was issued onto multiple platforms. This would mean a bank might have pockets of cash sitting on separate networks. One of the promises of wholesale CBDC is pooling liquidity rather than fragmenting it. This emphasizes the need for interoperability both with existing infrastructures and between DLTs.

Another topic also raised elsewhere is that instant settlement can increase peak demands for cash. This triggers the need for new liquidity saving mechanisms, which have been explored by others. Blockchain is also starting to be used for intraday purposes which may help address these issues.


Image Copyright: andriisedykh / 123rf