The Swiss National Bank (SNB) is at the forefront of integrating cutting-edge technology in the financial sector. At a recent summit in Basel, SNB Chairman Thomas Jordan unveiled the bank’s strategic move towards asset tokenization.
Jordan outlined that the SNB assesses various methods to facilitate transactions using tokenized assets through central bank money. This approach not only aims to eliminate credit and liquidity risks but also reinforces the stability of the monetary system.
Asset Tokenization Over CBDCs
The project, known as Helvetia III, involves live pilots where participating banks utilize Swiss franc wholesale central bank digital currency (CBDC) to settle transactions with tokenized bonds on the SIX Digital Exchange (SDX).
Chair Jordan emphasized that settling transactions in central bank money is essential for maintaining financial stability. He highlighted the SNB’s pioneering role in leveraging blockchain technology to improve the operational efficiency of financial markets.
“If the tokenisation of assets becomes mainstream, settlement in central bank money will be crucial. This will allow central bank money to maintain its essential role as the anchor of the monetary system and to continue to serve as a safe means of payment,” Jordan stated.
Helvetia III represents a significant leap forward in the SNB’s digital innovation. Since its inception in December 2023, it has successfully facilitated multiple bond issuances and secondary market transactions. This marks a milestone in demonstrating the practical utility of wholesale CBDCs in a real-world environment.
Read more: What is Tokenization on Blockchain?
Chairman Jordan also discussed alternative settlement methods to wholesale CBDC, focusing on linking tokenized asset platforms with the Swiss RTGS system and utilizing privately issued token money, which is bankruptcy-protected and fully backed by sight deposits at the SNB.
Each method has its own governance challenges, but they collectively aim to address fragmentation issues in financial markets.
The SNB’s exploration into tokenization and its potential implications for monetary policy and financial stability reflects a proactive approach to technological advancements. By assessing the risks and benefits of these technologies, the SNB aims to determine the effective strategies for their implementation. It seeks to ensure that innovation aligns with its mandate of maintaining monetary and financial stability.
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