Sebastian Sinclair

<div id="highlights-block_61e0f18032350" class="highlights">
 <ul>
 <li>Switzerland&#8217;s central bank, the Bank for International Settlements and the SIX stock exchange have successfully conducted interbank transfers using a wholesale central bank digital currency</li>
 <li>The effort also involved five prominent banks including Citi, UBS, Goldman Sachs, Hypothekarbank Lenzburg and Credit Suisse</li>
 </ul>
 
</div>



The Swiss National Bank, the Bank for International Settlements&#8217; Innovation&nbsp;Hub Swiss Centre and the country’s stock exchange, SIX, have completed a joint experiment to integrate a wholesale central bank digital currency (CBDC) for interbank transactions.



Dubbed Project Helvetia, the second phase of the experiment, conducted in Q4, 2021, explored the settlement of interbank, monetary policy and cross-border transactions, according to a <a href="https://www.snb.ch/en/mmr/reference/pre_20220113/source/pre_20220113.en.pdf" target="_blank" rel="noreferrer noopener">statement</a> Thursday.



The project was conducted using the test systems of SIX, the central bank&#8217;s real-time gross settlement system, SIX Interbank Clearing as well as core banking systems. The effort also involved five prominent banks including Citi, UBS, Goldman Sachs, Hypothekarbank Lenzburg and Credit Suisse.



The move marks a turning point in CBDC infrastructure development, demonstrating to the rest of the world that such use of distributed ledger technology may yet prove useful to the traditional banking and financial sector.



In its test, the banks and stock exchange experimented on six use cases for its wholesale CBDC including issuance, redemption, delivery-versus-payment, transfers, booking and settlement as well as intraday control and monitoring, according to a <a href="https://www.snb.ch/en/mmr/reference/project_helvetia_phase_II_report/source/project_helvetia_phase_II_report.en.pdf" target="_blank" rel="noreferrer noopener">joint report</a>.



Phase I, conducted in 2020, involved testing two approaches for settling tokenized assets in central bank money by issuing a wholesale CBDC on a tokenized platform and then linking the existing payment system to a digital ledger.



A wholesale CBDC relates to the settlement of interbank transfers and&nbsp;wholesale&nbsp;transactions. It differs from retail CBDCs that aim to digitize a nation&#8217;s currency like the one seen in China with its digital yuan.



The second phase of Project Helvetia successfully demonstrates that such integration is &#8220;operationally possible,&#8221; the central bank said in its statement. Though it emphasized the project was an experiment of &#8220;exploratory nature&#8221; and was not to be interpreted as a move by the central bank to implement a wholesale CBDC.



“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 Benoit Coeure, Head of the BIS Innovation Hub.



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Swiss Central Bank, BIS, SIX Complete Test of Wholesale CBDC Trial Labelling it ‘Operationally Possible’

Ben Strack

<div id="highlights-block_613b834320bd1" class="highlights">
 <ul>
 <li>Authorization allows SDX to go live with a regulated trading, settlement and custody infrastructure based on distributed ledger technology for digital securities</li>
 <li>The approval boosts trust in digital assets, which will help drive adoption by institutional investors, CoinShares’ head of product told Blockworks</li>
 </ul>
 
</div>



Switzerland’s regulator will allow the <a href="https://www.sdx.com" target="_blank" rel="noreferrer noopener">SIX Digital Exchange</a> (SDX) to operate a stock exchange and a central securities depository for digital assets in the country, the exchange announced on Friday. 



The authorization by the <a href="https://www.finma.ch/en/" target="_blank" rel="noreferrer noopener">Swiss Financial Market Supervisory Authority</a>, or FINMA, enables SDX to launch infrastructure based on distributed ledger technology for digital securities that integrates trading, settlement and custody services.



This is the first time that FINMA has issued a license for infrastructures that facilitate the trading of digital securities in the form of tokens and their integrated settlement, the agency noted on its website.



“The digitalization of financial markets continues apace, and while the final shape of the market is still evolving, this is an important milestone in providing institutional investors with a safe and robust infrastructure meeting all of the core requirements of a traditional exchange and CSD infrastructure,” Thomas Zeeb, SIX’s global head of exchanges, said in a statement.



The exchange first announced this project in July 2018, an SDX spokesperson told Blockworks. The prototype for trading and central depository has been available since September 2019, and is being tested by various banks working with the exchange.&nbsp;



The platform was productive in the fourth quarter of 2020, the representative added, and now the corresponding FMI licenses have been obtained from FINMA.



“The task of building a fully regulated digital exchange has never been done before,” the SDX spokesperson said. “It is important because with these licenses, SDX can now offer the highest Swiss standards of oversight and regulation.”



Townsend Lansing, head of product at European digital asset manager <a href="https://coinshares.com" target="_blank" rel="noreferrer noopener">CoinShares</a>, noted that the news comes several months after Germany’s Federal Financial Supervisory Authority, known as BaFin, <a href="https://www.securities.io/boerse-stuttgart-launches-digital-exchange/" target="_blank" rel="noreferrer noopener">approved</a> the Boerse Stuttgart Digital Exchange (BSDEX).



He added that CoinShares welcomes another major European regulator clearing the path for digital assets to be traded and settled in ways that are similar to more traditional financial assets. 



<div class="wp-block-image"><figure class="aligncenter size-full"><img loading="lazy" decoding="async" width="400" height="400" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/09/1562058899085.jpeg" alt="Townsend Lansing, head of product at European digital asset manager CoinShares" class="wp-image-7776" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/09/1562058899085.jpeg?w=400 400w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/1562058899085.jpeg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/1562058899085.jpeg?w=150 150w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/1562058899085.jpeg?w=257 257w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/1562058899085.jpeg?w=261 261w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/1562058899085.jpeg?w=219 219w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/1562058899085.jpeg?w=80 80w" sizes="auto, (max-width: 400px) 100vw, 400px" /><figcaption>Townsend Lansing, head of product at European digital asset manager, CoinShares</figcaption></figure></div>



“This can only increase trust in the digital asset ecosystem, which in turn will help drive adoption and investment by institutional investors,” Lansing told Blockworks. “Europe in general, and Switzerland in particular, continue to lead the way for regulatory transparency and stability in digital currencies.”



SDX is focused on continuing to build out the digital financial ecosystem to create a global liquidity network for digital assets by engaging in cooperative ventures with partners and accelerating the onboarding of various global and local financial players. It expects its international customer base to expand to banks, issuers, insurance firms and other institutional investors.



“This is an important milestone in bringing the digitalization of capital markets into the mainstream, but it is only the beginning,” Zeeb said. “We will continue to work with our clients, regulators, and other stakeholders to shape the markets of the future.”



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