07 May 2024

SNB's Jordan: Project Helvetia III - The Swiss National Bank's pilot for wholesale CBDC

Let me thank the BIS for the opportunity to present and discuss Project Helvetia III. It is
a great pleasure to give you some insights into this pilot project of the Swiss National
Bank. The pilot represents the world's first issuance of a wholesale CBDC on a
regulated third-party platform to settle commercial transactions with tokenised assets.
Helvetia III is a good example of how learnings from BIS Innovation Hub projects can
be leveraged for real world use. We started this work together with the Hub's Swiss
Centre and the private sector more than four years ago. In Helvetia I and II, we jointly
expanded our understanding of wholesale CBDC and shared the findings with the
central bank community. We took advantage of this groundwork to launch Helvetia III in
December 2023, bringing Swiss franc wholesale CBDC from a test setting to real use.
In my remarks today, I will focus on three topics: First, I will share some preliminary
insights from the ongoing pilot. Then, I will discuss two alternatives to wholesale CBDC
we are currently exploring. I will conclude with reflections on the response of central
banks to tokenisation.

Project Helvetia III
The tokenisation of financial assets is gaining momentum.1 Switzerland has emerged
as one of the leading centres in the adoption of tokenisation within the regulated
financial system. This raises the following question for the SNB: How can transactions
with tokenised assets be settled in central bank money? Settlement in central bank
money is crucial for two reasons: First, it eliminates credit risk and minimises liquidity
risk in settlement, thereby contributing to financial stability. And second, it reinforces the
role of central bank money as the anchor for the monetary system.2

Helvetia III pilots tokenised central bank money for wholesale use, often referred to as
wholesale CBDC. Participating banks can use Swiss franc wholesale CBDC to settle
transactions with tokenised bonds on SIX Digital Exchange (SDX). SDX is a regulated
trading and settlement platform for tokenised assets. Since the start of the pilot, four
tokenised bond issuances and one secondary market transaction have been
successfully settled in wholesale CBDC.

Economically and legally, the wholesale CBDC used in Helvetia III is equivalent to sight
deposits on the SNB balance sheet. Access to wholesale CBDC is restricted to banks
and financial institutions which participate in the Swiss real-time gross settlement
system, or RTGS system for short. Legally, wholesale CBDC is an alternative
representation of sight deposits at the SNB. A key difference to sight deposits is that the
pilot makes tokenised central bank money available on the same third-party platform
where the tokenised assets are held.

This approach eliminates barriers in today's siloed financial market infrastructures. At
present, financial assets and central bank money are usually held on separate systems
that are linked in order to synchronise payments and asset transfers. With wholesale
CBDC as piloted in Helvetia III, assets and central bank money are instead closely
integrated. This reduces the need for synchronisation and reconciliation and facilitates
programmability. This approach aims to realise the benefits of tokenisation, but also
poses challenges. I would like to discuss two challenges relevant for central banks –
governance questions and fragmentation of central bank money – and share with you
how we address these in Helvetia III.

Let me start with governance. Issuing wholesale CBDC on a third-party platform entails
a public-private partnership. The central bank delegates certain tasks related to the
issuance and use of central bank money to the platform provider. This means that roles
and responsibilities must be clearly defined, as must rights and obligations. In Helvetia
III, the SNB delegates certain contractually agreed tasks to SDX. At the same time, the
SNB retains control and monitoring capabilities over the use of its wholesale CBDC.
Such capabilities are made possible by operational and technical means on the SDX
platform.

Let me now turn to the second challenge, the fragmentation of central bank money.
Wholesale CBDC creates an additional pool of central bank money, which needs to be
managed. If wholesale CBDC were to be issued on multiple third-party platforms,
central bank money would be fragmented even further. Measures to mitigate such
fragmentation are needed.

In Helvetia III, participating banks tokenise sight deposits and de-tokenise wholesale
CBDC through the Swiss RTGS system in a standardised, automated process. For this
to work seamlessly, the operating hours of the Swiss RTGS system and SDX are
aligned. If multiple third-party platforms with wholesale CBDC were to exist, this
approach could be replicated. De-tokenising wholesale CBDC on one platform and
tokenising sight deposits on another would use the same process and would be
facilitated by the Swiss RTGS system. The role of the SNB in this process would be to
control the issuance and redemption of wholesale CBDC on the respective platforms.
My focus so far has been on Project Helvetia III, which explores wholesale CBDC on a
third-party platform. But there are other approaches to settling tokenised asset
transactions. To understand the respective risks and benefits, we are examining two
alternative approaches to wholesale CBDC. In the second part of my remarks, I would
like to describe them and offer a preliminary assessment....

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