The Bank for International Settlements (BIS) and the Swiss National Bank (SNB) have released the first set of findings from Project Helvetia, a proof-of-concept experiment that aims to demonstrate that the Swiss franc can be tokenized as a Central Bank Digital Currency (CBDC).
Revealed on Dec 3, the BIS claims the results demonstrate the operational feasibility and legal workability of a digital franc used only for interbank settlement on a blockchain testnet.
Project Helvetia Background
In the works since 2019, the collaboration brought together the BIS, SNB, and financial market infrastructure provider SIX Group.
Under the terms of the agreement, announced in Oct 2019, the BIS established an Innovation Hub in Switzerland for the purpose of exploring digital currencies and real-time market monitoring.
Unlike China’s digital yuan, which has been in the headlines over the past month, the Swiss CBDC experiment only aimed to demonstrate that CBDCs can facilitate the settlement of tokenized assets between banks.
This is in line with the BIS’s stated position that blockchain-issued consumer currency has too many implicit risks.
Indeed, the announcement sought to pour cold water on the possibility of yielding a consumer-focused CBDC. An excerpt reads in part:
“The experiment should not be interpreted as an indication that the SNB will issue a wholesale CBDC.”
Project Helvetia Findings
According to the findings, the project successfully demonstrated the possibility of settling tokenized assets in multiple ways using a CBDC framework.
In one of the experiments, the SNB issued a Wholesale CBDC (w-CBDC) version of the Swiss franc on a blockchain testnet and successfully linked this testnet to the existing Swiss Real Time Gross Settlement (RTGS) platform.
Outlining what it achieved from the experiment, the SNB said:
“…What an RTGS link provides in terms of simplicity, it lacks in terms of potential benefits. The w-CBDC PoC demonstrates that an integration of tokenised central bank money and securities could enable functionality not possible with a link.”
Despite these positive findings, any potential implementation of a CBDC framework even on a wholesale (non-consumer) basis would still raise a number of practical and policy issues for a central bank, the BIS said.
For this reason the bank required more exploration of the technology.