Exploring Tokenization of Financial Assets with Swiss National Bank
Welcome, crypto enthusiasts! Today, let’s delve into the latest developments at the Swiss National Bank (SNB) concerning the tokenization of financial assets. Thomas Jordan, the chairman of the governing board at SNB, recently highlighted the bank’s exploration of innovative ways to tokenize financial assets. Let’s take a closer look at the key points discussed by Chairman Jordan at a recent event in Basel.
SNB’s Investigation into Wholesale CBDC
- Thomas Jordan mentioned that the Swiss National Bank is currently evaluating alternative options to its wholesale CBDC.
- He outlined the pros and cons of wholesale CBDC and mentioned that SNB is conducting live pilots as part of Project Helvetia III.
- The project, initiated in December 2023, allows participating banks to utilize Swiss franc wholesale CBDC for settling transactions with tokenized bonds on SIX Digital Exchange (SDX).
Benefits of Central Bank Money Settlement
- Chairman Jordan emphasized the importance of settlement in central bank money for financial stability.
- He highlighted that central bank money acts as an anchor for the monetary system and eliminates credit risk and liquidity risk in settlement.
- The pilot project aims to make tokenized central bank money available on a third-party platform, thereby eliminating existing barriers in financial market infrastructures.
Jordan’s Alternatives to Wholesale CBDC
- Besides exploring wholesale CBDC, Chairman Jordan mentioned two alternative settlement approaches that SNB is testing.
- The first approach involves linking the tokenized asset platform with the Swiss Real-Time Gross Settlement (RTGS) system.
- The second approach utilizes private token money issued on the tokenized asset platform, which is fully backed by sight deposits at SNB and provides bankruptcy protection.
Addressing Governance and Fragmentation Challenges
- While the RTGS approach tackles governance and fragmentation challenges, it involves traditional siloed operations and synchronization through messages.
- The private token money approach enables integrated settlement where money and assets are held on the same platform, addressing governance challenges but not fragmentation.
- Both approaches require thorough assessment to understand the associated benefits and risks accurately.
Hot Take 🚀
Stay updated with the latest developments in tokenizing financial assets with the Swiss National Bank. Chairman Thomas Jordan’s insights provide valuable information on the future of wholesale CBDC and alternative settlement approaches. Keep exploring the world of crypto finance for more exciting updates!
Sources:
1. Bank for International Settlements – Event in Basel
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