The Bank of International Settlements (BIS) has concluded a study that studies the use of a wholesale Central Bank Digital Currency (CBDC). According to an announcement from the global financial institution, the study had concluded that it was “possible to settle tokenized financial assets and foreign exchange transactions with wholesale CBDCs.”
Details Of The Study
The study was conducted by the BIS Innovation Hub in conjunction with the Bank of France (BoF), and the Swiss National Bank (SNB), the central banks of France and Switzerland respectively. During the study, they tested the use of a wholesale CBDC to conduct international settlements between financial institutions.
The institutions trialed the settlement of foreign exchange transactions in Swiss francs and euros using a wholesale CBDC under Project Jura. During the study, the central banks of France and Switzerland issued, transferred, and redeemed French commercial paper denominated in euros.
The experiment trialed the direct transfer of Swiss francs and euro wholesale CBDCs between commercial banks in Switzerland and France on a distributed ledger technology platform that was operated by a third party. These transfers took place in a near-real setting using real-value transactions. All transactions met all existing regulatory requirements.
Besides the two central banks, several private sector firms were involved in the study. They included Credit Suisse, R3, SIX Digital Exchange, UBS, and Accenture. The project will continue under the SNB and BIS Innovation Hub as Project Helvetia. It is part of a series of wholesale CBDC experiments that were initiated by the BoF in 2020. France’s central bank has been mulling the idea of a wholesale CBDC at least since 2019. In October of that year, the Deputy Governor of the French Central bank called for central banks globally to consider implementing wholesale CBDCs.
What The Leaders Had To Say
Commenting on the conclusion of Project Jura, Andréa M Maechler, who is a Member of the Governing Board of the SNB said that as a small country, Switzerland needs efficient and robust cross-border payment and settlement arrangements. Maechler added that:
“Project Jura explores how distributed ledger technology can be successfully leveraged to map out how future-proof cross-border settlement between financial institutions could look like.”
Sylvie Goulard, the Deputy Governor of the Bank of France also commented on the conclusion of the study, he said:
“With the great success of Jura, the wholesale CBDC experiment program launched by the Banque de France in 2020 is now completed. Jura demonstrates how wholesale CBDCs can optimize cross-currency and cross-border settlements, which are a key facet of international transactions.“
Real–World CBDCs Closer To Reality
Besides the experiment in Europe, the BIS has been conducting tests for CBDCs in other regions of the world. For instance, it is carrying out similar tests in the UAE, China, and Hong Kong. Other central banks such as those of South Korea, the United Kingdom, and Hong Kong, have also been seriously looking into the issue. However, China has made the most progress in this area with real-world tests of a retail CBDC ongoing in various cities.
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