Swiss National Bank Chair Jordan Explores Alternatives to Wholesale CBDC
In a recent event held in Basel, Thomas Jordan, the chairman of the governing board of the Swiss National Bank (SNB), discussed the bank’s exploration of different methods to tokenize financial assets. Jordan highlighted that the SNB is currently investigating alternative options to its wholesale central bank digital currency (CBDC).
As part of Project Helvetia III, the SNB is conducting live pilots to assess the pros and cons of wholesale CBDC. Launched in December 2023, the project allows participating banks to settle transactions with tokenized bonds on the SIX Digital Exchange (SDX) using Swiss franc wholesale CBDC.
Chairman Jordan emphasized the importance of settlement in central bank money, stating that it serves two crucial purposes. He also explained how the pilot project facilitates the availability of tokenized central bank money on a third-party platform, thereby eliminating barriers in the current fragmented financial market infrastructures.
Addressing the challenges of governance and fragmentation of central bank money in wholesale CBDC, Jordan presented two alternative settlement approaches being tested by the SNB. The first approach involves linking the tokenized asset platform with the Swiss real-time gross settlement (RTGS) system. The second approach utilizes private token money issued on the tokenized asset platform, which is bankruptcy-protected and fully backed by sight deposits at the SNB.
While the RTGS approach resolves governance and fragmentation challenges, it still relies on traditional siloed operations and synchronization through messages. On the other hand, the private token approach allows for an integrated settlement system where money and assets are held on the same platform, addressing the governance challenge but not fragmentation.
Jordan emphasized that both approaches require careful assessment to evaluate the associated benefits and risks. The SNB remains committed to exploring these alternatives to wholesale CBDC as part of its ongoing efforts to enhance the tokenization of financial assets.
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