Digital Euro and Swiss Franc trials successful, central banks say

ZURICH, December 8 (Reuters) – Europe’s first cross-border trial of central bank digital currency payments (CBDC) has been described as a success by central banks in Switzerland and France, although they have said it will not would not immediately lead to the issuance of CBDC.

Project Jura, named after the mountains between the two countries, is the latest in a series of CBDC trials by central banks keen to refute the threat from crypto assets. Much like physical cash, CBDCs essentially give holders a direct claim on the central bank.

The trial, the first time a digital euro and a Swiss franc were fully tested, showed that it was possible to settle foreign exchange transactions in wholesale CBDCs in euros and Swiss francs, as well as to issue , to reimburse and transfer French commercial paper denominated in euros between establishments.

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The Jura has focused on “wholesale” bank-to-bank credit markets which, unlike retail CBDCs, are limited to financial institutions.

The trial involved the Bank for International Settlements (BIS), Swiss banks UBS (UBSG.S) and Credit Suisse (CSGN.S) and France’s Natixis, alongside Swiss stock exchange operator SIX, fintech R3 and the consultancy firm Accenture (ACN.N).

“The Jura project confirms that a well-designed wholesale CBDC can play an essential role as a secure and neutral settlement asset for international financial transactions,” said Benoît Coeuré, Head of the BRI Innovation Hub.

Tokenized assets and foreign exchange transactions were settled in a safe and efficient manner, the BIS said.

The experiment explored the direct transfer of wholesale CBDCs in euros and Swiss francs between French and Swiss commercial banks on a single distributed ledger technology platform operated by a third party.

During the three-day trial in November, 200,000 euros of commercial paper was issued against a wholesale CBDC and transferred between banks, along with foreign exchange transactions.

The trial was conducted in a near real-world setting, used real-value transactions, and met current regulatory requirements, the BIS added. Read more

The Jura project also addressed concerns about the issuance of wholesale CBDCs on a third-party platform and the access of non-resident financial institutions to central bank money.

Thanks to a new approach using technology for subnets and double notary signing, payments would be almost instantaneous, with both central banks having to digitally approve transactions before they are made.

However, central banks said the project was “exploratory” and should not be taken as indicating that France or Switzerland were considering issuing digital currencies in bulk.

The SNB does not currently intend to issue a wholesale CBDC or a CBDC of any kind, said Andrea Maechler, member of the SNB board.

“This is an important experience, the results have been very valuable … but there are still many questions, both of a technological nature and very important political questions which remain to be better understood,” she said.

While CBDCs have the potential to make existing wholesale financial systems faster, cheaper and more secure, Europe has so far fallen behind in the global race for electronic currencies. Meanwhile, China is already testing a digital yuan, or e-CNY, in major cities.

“We are not far at the end of the road, but it is an important first step, which makes us confident of being able to stay in this race,” said Sylvie Goulard, Deputy Governor of the Banque de France.

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Reporting by John Revill; edited by Sujata Rao and David Evans

Our Standards: Thomson Reuters Trust Principles.

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