SNB’s Jordan Touts Different Options for Tokenization Settlement
(Bloomberg) — The Swiss National Bank is investigating alternatives to its pilot project of a central-bank digital currency for banks, according to President Thomas Jordan.
The institution’s so-called wholesale CBDC, which operates on the infrastructure of Swiss stock-market provider SIX, allows banks to employ tokenized central-bank money to settle transactions like buying bonds on the same platform. This eliminates credit risk and allows users to take advantage of digital assets, which could offer features like programmability.
Speaking on Monday at a Bank for International Settlements conference in Basel, Jordan outlined two other approaches to transaction settlement with tokenized assets that the SNB is looking at:
- An “RTGS link”: Assets and central-bank money could stay on separate infrastructures which are linked. The settlement would take place via messages going back and forth between the tokenized platform and the traditional real-time gross settlement, or RTGS, system.
- “Backed private token money”: Assets could be on the same infrastructure with privately-issued tokenized money, which is fully backed by sight deposits at the central bank.
Both approaches have advantages and downsides, Jordan said. While the RTGS link might limit the potential to improve the status quo, the backed private token money could raise regulatory challenges because it isn’t a direct claim on the central bank but would be used as such.
Jordan didn’t indicate if the SNB’s pilot CBDC will continue after its current end-date in June. He said earlier that the project has so far successfully facilitated four bond issuances by Swiss municipalities, and also reiterated that he sees good reasons for the central bank to avoid crypto investments.
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