SNB Chairman Jordan sees potential for digital central bank money
Published: Monday, Apr 8th 2024, 19:20
Back to Live Feed
The global financial system is undergoing a digital transformation, and central banks are also looking for ways to exploit the potential of new technologies. Last December, the Swiss National Bank (SNB) launched the Helvetia III pilot project, in which digital central bank money in Swiss francs is issued to financial institutions.
The SNB is the world's first central bank to issue central bank money in tokenized form on a regulated third-party financial market infrastructure, said SNB Chairman Thomas Jordan at the SNB conference on "Towards the monetary system of the future" on Monday.
The tokenization of assets, i.e. the digital representation of such assets on a system for distributed recording on a computer network (distributed ledger), is currently gaining in importance, Jordan continued. It promises a more secure, more efficient and more transparent financial market infrastructure for the transfer of assets in real time.
Switzerland leads the way in tokenization
Switzerland is one of the leading financial centers in the use of tokenization in a regulated financial system, Jordan noted. In the current year, around 2.5 percent of Swiss franc bonds have been issued in tokenized form. The SNB is now asking itself how transactions with tokenized assets can be settled in central bank money.
According to Jordan, one option that the SNB has been evaluating since December as part of the Helvetia III pilot project is the issuance of tokenized central bank money in Swiss francs for financial institutions. This money would be made available for the processing of business transactions on the same platform of a third-party provider on which the tokenized assets are held.
Initial findings had shown that this approach could maintain the advantages of settlement in central bank money even in a tokenized world. However, some questions remain unanswered: should the SNB, for example, wait with its initiatives until tokenization gains further importance? And are the instruments currently under discussion the best solution for settlement? There is also a need for benchmarks that third-party providers would have to meet on their platforms in order to be considered for transactions.
Faster payment transfers thanks to Instant Payments
Jordan also spoke about instant payments, which will enable private individuals and companies to make payments between themselves from account to account within seconds and around the clock. These customer payments would ultimately be processed through transfers of central bank money between commercial banks.
To this end, the SNB launched a new, greatly improved version of the SIC payment system in November. According to Jordan, at least 50 banks, which together cover around 98 percent of customer payments in Switzerland, should be able to receive and process instant payments by late summer this year. "This will also lay the foundation for competition between different payment instruments and for innovations such as programmable payments," said the SNB chief.
©Keystone/SDA
English 
German 
French 
Spanish 
Arabic