Switzerland tests digital currency payments with top investment banks

A general view of the Swiss National Bank (SNB) building in Zurich, Switzerland December 16, 2021. REUTERS/Arnd Wiegmann

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ZURICH, Jan 13 (Reuters) – The Swiss 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 closer to Switzerland, which has conducted some of the most advanced central bank digital currency (CBDC) experiments in Europe.

Central banks around the world have stepped up their work on CBDCs, in part to make existing payment systems more efficient and to counter the challenge of cryptocurrencies, with research focusing on versions intended for wholesale or retail. detail.

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Under Helvetia, named after the symbol of Switzerland, the SNB integrated CBDCs into payment systems and used them in simulated transactions in the experiment that involved UBS (UBSG.S), Credit Suisse (CSGN.S) Goldman Sachs (GS.N) Citigroup (CN) and Hypothekarbank Lenzburg.

The scheme showed that it was possible to instantly execute payments ranging from 100,000 to 5 million Swiss francs ($109,469 to $5.47 million), eliminating counterparty risk.

“We have demonstrated that innovation can be harnessed to preserve the best parts of the current financial system, including central bank money settlement, while potentially unlocking new benefits,” said Benoit Coeuré, Chief Innovation Officer. of the Bank for International Settlements (BIS). Hub, who also participated in the experiment.

The project, which took place over three days towards the end of 2021, also involved Swiss exchange operator SIX, Switzerland’s leading provider of financial infrastructure services.

It involved the issuance and redemption of wholesale CBDCs and their use for payments and for the settlement of securities purchases in Switzerland as well as cross-border transactions.

It followed previous experiments by the SNB, BIS and SIX on the use of digital currencies. Read more

While retail CBDCs would be used by households and businesses for day-to-day 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 the settlement of securities transactions — which can take days, with multiple parties involved — more efficient.

A CBDC could be programmed with instructions to deliver security instantly upon receipt of digital cash.

While central banks in Hong Kong, Thailand, and the United Arab Emirates, as well as Singapore, have considered using CBDCs for wholesale cross-border payments, few have considered in detail how a CBDC would be integrated with commercial lenders.

The group involved in Helvetia will now evaluate the results before deciding on the next steps.

($1 = 0.9135 Swiss francs)

(This story has been refiled to remove the duplication of the third paragraph further down in the story)

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Reporting by John Revill in Zurich and Tom Wilson in London Editing by Matthew Lewis

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Sylvia B. Polson