BIS, “Central Bank of Central Banks,” Exploring Interbank Digital Asset Settlement and Central Bank Digital Currency at Switzerland Innovation Hub

The Bank for International Settlements (BIS), popularly known as the “central bank of central banks,” will be engaging in two projects at the BIS’s newly-established Innovation Hub in Switzerland, one of which involves, “examin(ing) the integration of digital central bank money into a distributed ledger technology infrastructure.”

The BIS has signed an operational agreement with Switzerland’s SIX Exchange and the Swiss National Bank (SNB) to explore how a, “new form of digital central bank money would be aimed at facilitating the settlement of tokenised assets between financial institutions.”

According to the BIS:

“Tokens are digital assets that can be transferred from one party to another. The project will be carried out as part of a collaboration between the SNB and the SIX Group in the form of a proof of concept.”

In late September, SIX Group announced it is delaying the launch of its proposed platform for DLT (distributed ledger technology) settlement of “digital assets” until Q4 2020.

Bobby Brantley, co-founder of the MERJ Exchange in the Seychelles, which currently offers its own DLT platform for “digital assets,” said at the time that he believes concerns about regulations informed the delay:

“The challenge with introducing digital infrastructure has never really been the technology. The biggest challenge is building a robust regulatory framework to underpin it.”

SIX, the BIS and the SNB will also be working on a second project that seems to involve developing a market surveillance tool:

“The second project will address the rise in requirements placed on central banks to be able to effectively track and monitor fast-paced electronic markets. These requirements arise in particular from the greater automation and fragmentation of the financial markets, but also from the increased use of new technologies.”

Regarding the initiative, SIX CEO Jos Dijsselhof, remarked:

“We are pleased to contribute to this initiative and, through SIX Digital Exchange, to explore the technological possibilities with which the SNB could support token-based financial ecosystems in the future by providing digital central bank money for financial market participants.”

Agustín Carstens, General Manager of the BIS, who until recently was sharply critical of the idea of central banks issuing digital currencies, remarked that he is happy that one of the BIS’s innovation hubs will be located in Switzerland:

“We are very proud that one of the first three Hub Centres will be here in Switzerland, where the BIS has been based for nearly 90 years. Switzerland is a hotbed of innovation. This comes on top of its overall competitiveness, well-established financial ecosystem, and strong academic institutions specialising in technology.”

Other BIS innovation hubs are being set up in Hong Kong SAR and Singapore, the BIS writes.

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