- The Swiss central bank has declared its blockchain-based CBDC pilot program “very successful” and announced the program will be extended by two years.
- The pilot program allows participants to issue and buy tokenised bonds on a digital exchange using an experimental digital currency issued by the central bank.
According to a report from Bloomberg, in the wake of the collapse of Credit Suisse in early 2023 the country’s financial elite started planning a new blockchain-based financial infrastructure which has been being tested in a pilot program for the past year or so. Last week the nation’s central bank declared the program “very successful” and announced a two year extension.
The pilot program, which involves Switzerland’s central bank along with some of its largest banks and cities, has seen hundreds of millions of dollars worth of tokenised bonds issued on a digital exchange using the nation’s experimental central bank issued digital currency (CBDC).
Related: Swiss Push for Bitcoin Adoption: Advocates Urge Central Bank to Pioneer Crypto in Reserves
Pilot Program Sees Banks, Cities, Issue Bonds
The pilot program saw digital bonds traded on the SIX Digital Exchange (SDX), the first fully regulated exchange of this type anywhere in the world. As part of this pilot, the Swiss central bank allowed SDX to trade bonds using an experimental CBDC, which the central bank says significantly reduces credit risk compared to private digital currencies like Tether and USDC.
According to Bloomberg’s report, on June 11 of this year a 200 million franc (US$224 million) World Bank issued bond was settled on SDX using the experimental CBDC. The City of Lugano has also been a big user of the system — Lugano sold its first digital bonds before the pilot program started, selling a 100 million franc issuance in about 90 minutes, but after the CBDC program launched it sold a similarly sized issuance in just 25 minutes.
Speaking to Bloomberg, Paolo Bertolin, the deputy chief financial officer of the City of Lugano, said he wasn’t sure if it was the CBDC that explains the faster sale of the second issuance. However, Bertolin also said that after seeing the Swiss finance sector lose ground to competitors for decades he believes being at the forefront of blockchain technology will be crucial if Switzerland is to regain its position at the top of global finance.
The investment services firm, Moody’s Corp., says the lack of blockchain-friendly digital cash has been an impediment to usage of these kinds of systems, but Switzerland is leading in this area with its CBDC:
The lack of digital cash compatible with distributed ledger technology is often a significant obstacle to advancing this technology…Switzerland is the most advanced in this area.
Moody’s Tokenisation Isn’t That Big Of A Deal, Says McKinsey
Global consulting firm McKinsey & Company says real world asset (RWA) tokenisation (which includes things like bonds, mutual funds/ETFs, real estate and other real world assets) isn’t going to be nearly as big a deal as we’ve been told. McKinsey last week released a report saying RWA tokenisation will max out at US$4 trillion by 2030 under its most optimistic scenario.
The consulting firm says tokenisation may even be as low as US$1 trillion, but its middle-ground estimate was US$2 billion — notably though this figure excluded tokenised deposits, stablecoins and central bank digital currencies.
Related: RWA Tokenisation on the Horizon: Understanding Its Impact
McKinsey’s estimate is far lower than estimates from rival consulting firm Boston Consulting Group who released a report last year predicting RWA tokenisation could be worth up to US$16 trillion by the end of the decade.
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