The Swiss National Bank and Banque de France will test Europe’s first cross-border digital currency payments by a central bank, banks said Thursday, a first step for the world’s two leading currencies.
The experiment will focus on the “wholesale” interbank lending market rather than day-to-day public transactions, but this will be the first time that the digital euro and Swiss franc will be fully tested.
The project involves the Swiss UBS (UBSG.S), Credit Suisse (CSGN.S) and the French Natixis (CNAT.PA), as well as the Swiss exchange operator SIX Digital Exchange, fintech firm R3 and the Center for Innovation at the Bank for International Relations. Settlements.
The eurozone is adapting to a “strong trend” towards the digitization of payments, ”said Sylvie Goulard, deputy governor of the Bank of France.
This is the last CBDC pilot project of the Bank of France. In April, he “settled” – or made payments on digital bonds issued by the European Investment Bank using blockchain technology.
“Banque de France is convinced of the potential benefits of a central bank digital currency to maximize the security and efficiency of financial transactions,” Goulard said.
The collaboration between the two central banks was named Jura, after the ridge separating Switzerland and France.
It will include the exchange of a wholesale Euro CBDC for a wholesale Swiss franc CBDC through a pay versus pay settlement mechanism. These transactions will be made between banks located in France and Switzerland.
This technology means payments will be almost instantaneous, while both central banks actually have to digitally confirm them before they can go through.
“For CBDCs to be real, they need to be used across borders and in a way that preserves sovereignty,” said Todd McDonald, co-founder of R3, the technology behind the technology.
Central banks said the project is “exploratory” and is not a sign that their digital currencies will be fully introduced.
The scheme, which will operate over the next few months, is also the latest part of an experiment Project Helvetia launched in Switzerland last year to leverage tokenized assets with wholesale CBDCs.
It also happened after the central banks of China and the United Arab Emirates joined a cross-border digital currency project called Multiple CBDC, dubbed m-bridge, in partnership with the innovation arm of BIS, based in Hong Kong.
SNB board member Andrea Mehler said her bank is participating because “it is important for central banks to stay on top of technological advances.”
Wholesale digital currencies, usually restricted to financial institutions with central bank accounts, are different from retail CBDCs that are available to the general public.
They are considered the most popular offering among central banks because of their ability to make existing wholesale financial systems faster, cheaper and more secure.
The SNB is skeptical of digital currencies like Facebook’s Diem project, formerly known as Libra, claiming they could undermine its ability to conduct monetary policy.
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