Project Helvetia: The future of the digital central bank currency

Project Helvetia is a project of the Swiss National Bank (SNB) in cooperation with the Bank for International Settlements (BIS) and the financial infrastructure operator SIX. The aim is to investigate the introduction of a digital central bank currency (CBDC) for the wholesale sector. The focus is on the use of distributed ledger technology (DLT) for the settlement of payments and securities transactions in order to increase the efficiency and security of the financial infrastructure.

Overview and phases of the project

Project Helvetia was carried out in several phases to test the integration of a wholesale CBDC into the Swiss financial infrastructure:

• Phase I (2020): In this phase, the technical feasibility of a wholesale CBDC was tested. The settlement of payment transactions via a digital central bank currency was integrated into Switzerland’s existing real-time gross settlement (Swiss Interbank Clearing, SIC) in order to test the basic technological possibilities.
• Phase II (2021): The investigation was extended to the settlement of securities transactions. The aim was to make a wholesale CBDC usable for the settlement of financial market transactions. It was examined how the settlement of securities transactions via DLT-based platforms can be integrated into the existing infrastructure. The focus was on efficiency, security and risk management.

Impact on the future of the financial system

Project Helvetia is of great importance for the future of the financial world. Here are some possible impacts and benefits that could arise from this project:

1. Increased efficiency in the financial sector: The use of DLT could speed up the settlement of financial transactions. Automated processes could significantly reduce the time required to settle large-value payments and securities transactions.
2. Strengthening security: The implementation of a wholesale CBDC could improve the security of financial transactions by reducing counterparty risk and increasing transparency. Direct settlement between central bank accounts would reduce the need for intermediaries, which could minimize the risk of payment defaults.
3. Promoting innovation: Project Helvetia helps the SNB to be prepared for technological developments. The investigation and possible implementation of a CBDC could serve as a catalyst for further innovation in the banking sector. It could encourage banks and other financial institutions to develop new business models and digital services.
4. Switzerland’s competitiveness in the global financial market: By exploring and potentially introducing a digital central bank currency, Switzerland is positioning itself as a pioneer in the digital financial world. This could strengthen the country as a financial center and increase its attractiveness for international investors.
5. Adaptability to regulatory requirements: The insights from Project Helvetia can help the SNB to better understand and address future regulatory requirements related to digital currencies and new technologies. This is crucial to ensure financial market stability while enabling innovation.

Challenges and risks

Despite the potential benefits, there are also challenges that need to be addressed:

• Technological risks: The use of DLT requires robust security mechanisms to prevent cyberattacks and technical failures.
• Regulatory adjustments: A CBDC could require significant changes in financial regulation, particularly with regard to money laundering prevention and data protection.

Conclusion

Project Helvetia shows that Switzerland is proactively working to shape the future of digital finance. By researching CBDCs and integrating them into the existing financial market infrastructure, the country can strengthen its position as a leading financial center while being prepared for technological changes. The introduction of a wholesale digital central bank currency could revolutionize the financial system by enabling greater efficiency, security and innovation.