Switzerland tests digital currency payments with top investment banks

Hypothekarbank Lenzburg AG

13/01/2022 10:00

By John Revill and Tom Wilson
    ZURICH, Jan 13 (Reuters) - Switzerland's central bank has
successfully used digital currency to settle transactions
involving five commercial banks, the Swiss National Bank said on
Thursday, the latest trial of the technology in wholesale
markets.
    The trial, called Project Helvetia, could bring the
introduction of central bank digital currencies a step nearer in
Switzerland, which has conducted some of the most advanced
central bank digital currency (CBDC) experiments in Europe.
    Central banks across the world have stepped up work on
CBDCs, in part to make existing payment systems more efficient
and to counter the challenge from cryptocurrencies, with
research focusing on versions for both wholesale or retail use.
    Under Helvetia, named after the symbol for Switzerland, the
SNB integrated CBDCs into payment systems and used them in
simulated transactions in the experiment which involved UBS
 UBSG.S , Credit Suisse  CSGN.S  Goldman Sachs  GS.N  Citigroup
 C.N  and Hypothekarbank Lenzburg  HBLN.S .
    The scheme showed it was possible to instantaneously execute
payments, which ranged in size from 100,000 to 5 million Swiss
francs ($109,469 to $5.47 million), eliminating counter-party
risk.
    "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 Coeuré, head of
the Bank for International Settlements (BIS) Innovation Hub,
which also took part in the experiment. 
    The project, which took place over three days towards the
end of 2021, also involved Swiss stock exchange operator SIX,
Switzerland's main provider of financial infrastructure
services. 
    It involved the issuance and redemption of wholesale CBDCs
as well as using them for payments and for the settlement of
securities purchases in Switzerland as well as cross-border
transactions. 
    It followed earlier experiments https://www.reuters.com/article/snb-digitalcurrency/swiss-central-bank-readying-cross-border-digital-currency-test-idUSL1N2MM1UX
 by the SNB, BIS and SIX into the use of digital currencies https://www.reuters.com/article/swiss-snb-currency-digital/swiss-central-bank-says-wholesale-digital-currency-trial-a-success-idUSZ8N2FE01J.
  urn:newsml:reuters.com:*:nZ8N2FE01J  urn:newsml:reuters.com:*:nL8N2ST0ZA
    Central banks across the world have been stepping up work on
CBDCs, in part to make existing payment systems more efficient,
with research focusing on versions for both wholesale and retail
use.
    While retail CBDCs would be used by households and
businesses for everyday transactions, wholesale versions could
be used to make large-scale payments between banks or other
entities with central bank accounts.
    Backers say wholesale CBDCs could also make settling
securities trades - which can take days, with several parties
involved - more efficient. 
    A CBDC could be programmed with instructions to deliver the
security instantly upon receipt of digital cash.
    While central banks in Hong Kong, Thailand and the United
Arab Emirates, as well as Singapore, have looked at using CBDCs
for wholesale cross-border payments, few have examined in detail
how a CBDC would be integrated with commercial lenders.
    The group involved in Helvetia will now assess the results
before deciding on next steps.
 ($1 = 0.9135 Swiss franc)

 (Reporting by John Revill in Zurich and Tom Wilson in London
Editing by Matthew Lewis)
 ((John.Revill@thomsonreuters.com; +41 58306 7022; Reuters
Messaging: john.revill.thomsonreuters.com@reuters.net))