Indeed the latest trial, known as Project Helvetia carried out by the central bank, could pave the way for the implementation of a central bank digital currency (CBDC) in Switzerland, with the nation performing some of the most sophisticated CBDC tests in Europe, according to a press release [PDF] by the Swiss National bank. Central banks throughout the globe have increased their efforts to develop CBDCs, in part to improve the efficiency of current payment systems and to address the challenges presented by cryptocurrencies. The research has focused on CBDCs that can be used for both wholesale and retail transactions.
What is the Helvetia project?
As part of the Helvetia project, which was named after the national emblem of Switzerland, the Swiss National Bank incorporated CBDCs into payment systems and used them to simulate transactions in an experiment that included UBS, Credit Suisse, Goldman Sachs, Citigroup, and Hypothekarbank Lenzburg. The project demonstrated that it was feasible to instantly execute payments ranging in size from 100,000 to 5 million Swiss francs ($109,469 to $5.47 million), hence removing the danger of a counter-party being harmed by the transaction. According to the head of the Bank for International Settlements (BIS) Innovation Hub, Benoit Coeuré, whose bank also participated in the trial.
Swiss stock exchange provider SIX involved
Swiss stock exchange operator SIX, Switzerland’s primary supplier for financial infrastructure services, was also a participant in the experiment, which took place across three days at the end of 2021. As part of these purchases, wholesale CBDCs were issued and redeemed, and they were also used to make payments and to settle transactions involving the acquisition of securities both inside Switzerland and beyond borders.
CBDC to improve the efficiency of current payment systems
Notably, central banks throughout the globe have been speeding up their efforts to develop CBDCs, in part to improve the efficiency of current payment systems. The wholesale versions of CBDCs, on the other hand, might be used to conduct large-scale payments between banks or other organizations having central bank accounts, while consumers and companies would use retail CBDCs for daily transactions. Wholesale CBDCs, according to its supporters, might help speed up the settlement of securities deals, which can take days when numerous parties are involved. After receiving digital currency, a CBDC might be designed to provide security immediately upon receipt of the digital cash. Finally, the committee concerned in Helvetia will now evaluate the findings before making a decision on the next actions to be taken.
