The Swiss National Bank’s Move Towards Asset Tokenization
The Swiss National Bank (SNB) is embracing cutting-edge technology in the financial sector. At a recent summit in Basel, SNB Chairman Thomas Jordan revealed the bank’s strategic shift towards asset tokenization. Jordan highlighted the bank’s efforts to explore various methods to enable transactions using tokenized assets through central bank money. This approach aims to mitigate credit and liquidity risks while strengthening the stability of the monetary system.
Asset Tokenization Over CBDCs
The SNB’s project, named Helvetia III, includes live pilots where participating banks use Swiss franc wholesale central bank digital currency (CBDC) to settle transactions involving tokenized bonds on the SIX Digital Exchange (SDX). Chairman Jordan emphasized the importance of settling transactions in central bank money for maintaining financial stability. He pointed out the SNB’s leadership in utilizing blockchain technology to enhance the operational efficiency of financial markets.
- Settlement in Central Bank Money:
- The tokenization of assets becoming mainstream necessitates settlement in central bank money for its crucial role in the monetary system’s stability.
Helvetia III marks a significant advancement in the SNB’s digital innovation journey. Since its launch in December 2023, it has successfully facilitated multiple bond issuances and secondary market transactions, demonstrating the practical application of wholesale CBDCs in real-world scenarios.
Exploring Alternative Settlement Methods
Chairman Jordan also explored alternative settlement methods to wholesale CBDC, focusing on connecting tokenized asset platforms with the Swiss RTGS system and using privately issued token money that is bankruptcy-protected and fully backed by sight deposits at the SNB. While each method presents governance challenges, they collectively aim to tackle fragmentation issues in financial markets.
- Addressing Governance Challenges:
- Alternative settlement methods pose governance challenges but collectively aim to resolve fragmentation issues in financial markets.
The SNB’s exploration of tokenization and its potential impact on monetary policy and financial stability showcases a proactive approach to technological advancements. By evaluating the risks and benefits of these technologies, the SNB seeks to determine effective strategies for their implementation, ensuring that innovation aligns with its mandate of maintaining monetary and financial stability.
By
By
By