Swiss National Bank Chief Discusses Two Alternatives to Wholesale CBDC
Swiss National Bank (SNB) Chairman, Thomas Jordan, has revealed that the bank is exploring different methods to tokenize financial assets. Speaking at an event in Basel on Monday, Jordan stated that the SNB is considering alternative options to its wholesale central bank digital currency (CBDC).
Jordan outlined the advantages and disadvantages of wholesale CBDC, stating that the SNB is currently conducting live pilots as part of Project Helvetia III, which was initiated in December 2023. Under this project, participating banks can use Swiss franc wholesale CBDC to settle transactions with tokenized bonds on the SIX Digital Exchange (SDX).
“Settlement in central bank money is important for two reasons,” stated Chairman Jordan during his address. He further explained that the pilot project allows tokenized central bank money to be available on a third-party platform, thus eliminating barriers in the current segmented financial market infrastructures.
Jordan highlighted governance and fragmentation as two challenges associated with wholesale CBDC. He also emphasized that the SNB is testing two alternative settlement approaches to wholesale CBDC. “The first alternative approach involves linking the tokenized asset platform with the Swiss RTGS system,” he explained. “The second approach utilizes private token money, which is issued on the tokenized asset platform and is fully backed by sight deposits at the SNB.”
According to Jordan, the real-time gross settlement (RTGS) approach addresses both governance and fragmentation challenges related to central bank money. However, it still relies on the traditional method of segregating operations and synchronizing through messages. On the other hand, the private token approach allows for an integrated settlement approach, where both money and assets are held on the same platform. While this method addresses governance challenges, it does not solve the issue of fragmentation.
Jordan concluded by stating that both of these approaches require careful evaluation to assess the associated benefits and risks.