Neue Episode

00:00:00: Thomas Moser: I think one use case, um, and that will be also a challenge also for, for, uh, central banks, is that you have, uh, the possibility now to have, uh, intraday, uh, interest payments. Yeah. So I mean, we have some, some of these use cases already. We see them where you pay interests every six or seven seconds, and that's clearly a different world.

00:00:21: Thomas Moser: And I think for treasurers, this is a dream ... come true. You can park your money for- Yeah ... a couple of hours somewhere and, and earn interest. Uh, for central banks, of course, the whole question of, uh, of providing liquidity. So far, we, we provide intraday liquidity, uh, interest free.

00:00:38: Dr. Lidia Kurt: Welcome to Insights: Digital Assets, the podcast about the future of capital markets, tokenization, digital assets, and the technologies that power them.

00:00:51: Dr. Lidia Kurt: Welcome to a new episode of Inside Digital Assets. Today, I'm sitting here with Thomas Moser, alternate member of the governing board of the Swiss National Bank. Welcome, Thomas.

00:01:00: Thomas Moser: Thank you, Lydia. Thanks for having me.

00:01:02: Dr. Lidia Kurt: Hey, it's a great pleasure to have you here. We had talks before on panels, on other, uh, opportunities, but it's really good to have you here in our podcast and really talk about, um, what the Swiss National Bank thinks about tokenization, what you think about it, where we see the future, uh, where the roles of the players in the industry might change or, or might not change.

00:01:21: Dr. Lidia Kurt: So very much looking forward to today's conversation.

00:01:24: Thomas Moser: Yeah, same here. Thank you.

00:01:26: Dr. Lidia Kurt: Now looking a bit at your CV and what you did, uh, up to now being in your position at the Swiss National Bank, you had very interesting positions before. Can you elaborate a bit on how you ended up at the, the position you're at now today?

00:01:40: Thomas Moser: Well, that's a good question. I never planned to end up where I am right now. It was never my intention, so I, I, I didn't even want to study economics at first. I actually wanted to study, uh, astrophysics. But then I was told, uh, by the ETH when I, when I asked them about, uh, how I would go best about studying it, they said...

00:02:03: Thomas Moser: And that was the late '80s, they said, "Computer science, that's the future, and we just have this new course, the first year for computer, um, uh, science." So I enrolled there, but like after one year I, uh, figured out that that was not really what I, what I want to do because back then it was still more like, uh, electrical engineering.

00:02:26: Thomas Moser: It was very hardware based the, the study. So I, then I switched to economics. I thought I have to do something. Uh, now I lost a year with the military service. I lost a year with, I thought I lost it, which actually, uh, with hindsight it helped me a lot- Mm-hmm ... what I learned there. Then I did economics. I, uh, went first to KOF then to the Swiss National Bank, and then I went to the IMF, and I actually planned to stay in Washington at the IMF, but then I got this very nice offer to come back to the Swiss National Bank, uh, to the, the current position I have now.

00:02:58: Thomas Moser: So it's already 16 years now that I'm an alternate member at the governing board. I switched internally. I started in the first department. I was the deputy of, um, Philipp Hildebrand and then Thomas Jordan, and then in 2018 I s- I switched to the third department, and then all this nice blockchain stuff came along and, uh, and so that's where I am.

00:03:19: Thomas Moser: So I never regretted what I did, but it was never intentional. It was never really planned.

00:03:26: Dr. Lidia Kurt: So your initial, um, idea to study computer science, you said, helped you along the way. Did you use it during your time at, at the IMF or now at Swiss National Bank?

00:03:36: Thomas Moser: No, not really, but later when I got interested in blockchain technology- Mm-hmm

00:03:40: Thomas Moser: and I think right now I, I still have some affinity, I would say some IT affinity. Not a deep knowledge, but, uh, some affinity which, uh, helps, clearly helps.

00:03:50: Dr. Lidia Kurt: And I mean, those that know you, um, know that you think very positively about blockchain, digital assets, tokenization, uh, in general. Can we start maybe to set a bit the grounds, like what the Swiss National Bank thinks about digital assets and tokenization?

00:04:06: Thomas Moser: So, I mean, for, from a Swiss national perspective, Swiss National Bank's perspective, I think that, uh, the real issues are always effectiveness of monetary policy and financial stability. So that's, that's the overall, uh, frame. But, uh, we are also very open to financial innovation, and in the end, uh, want to make sure that, uh, monetary policy remains effective, financial stability, uh, is, um, protected.

00:04:36: Thomas Moser: So we have to monitor very closely what's happening in the financial sector, and then see how we adjust our own services, so to say. And one of the main service that the central bank, uh, provides for the financial sector is to provide a safe settlement asset. That's where central bank money comes in. And I think for us, uh, so one angle was always if we were to have a systemically important new financial market infrastructure built on blockchain technology, how would we provide, uh, central bank money as a, as a safe settlement asset?

00:05:09: Thomas Moser: And that's also what guided our project or still guides our project, Helvetia.

00:05:15: Dr. Lidia Kurt: Let's, uh, deep dive in a second a bit more into Project Helvetia, but first also, like, how, how in general is, is the thinking about, uh, blockchain technology? Do you at the Swiss National Bank think that might be the future technology?

00:05:27: Dr. Lidia Kurt: Is it, like, one of many and we just look at it? Or how important is that?

00:05:31: Thomas Moser: Yeah. So I think there's not one opinion-

00:05:34: Dr. Lidia Kurt: Mm-hmm ...

00:05:34: Thomas Moser: on that at Swiss National Bank. I got interested in blockchain technology because I got interested in Bitcoin in 2013, so I followed it. I was, uh, fascinated, and still am fascinated by it.

00:05:46: Thomas Moser: But I guess w- we are still in the position as the Swiss National Bank, where we say we don't really know how the future financial market infrastructure looks like. But given that blockchain technology might be one option, we want to be ready.

00:05:59: Dr. Lidia Kurt: Yeah Now looking a bit at Project Helvetia, you mentioned it, um, it's, it's a project that is running for some time now already.

00:06:06: Dr. Lidia Kurt: Uh, you built wholesale CBDCs, uh, within that project. You looked at trigger solutions, uh, where we at Swissbank Digital are also a part of, uh, of this Project Helvetia around trigger solutions. Can you ela- elaborate a bit on what Project Helvetia is, what the scope is, and with which parties you're looking at?

00:06:24: Thomas Moser: Yeah. So Project Helvetia really started, uh, again, the, the initiative, uh, came from the private sector. It was not that the Swiss National Bank said we need to be doing something on a blockchain right now, but we saw that first, uh, SIX started with SDX, uh, so it was, uh, the first blockchain or DLT-based, uh, digital exchange.

00:06:45: Thomas Moser: And the question for us then was like, if that really takes off, how do we provide central bank money? And we looked at the two solutions that you mentioned. So one would be that we say, okay, we issue, we tokenize central bank money and issue that on that, uh, DLT, that's the wholesale CBDC. And the second solution, easier solution for us would be that we, we basically just let the DLT settle in our, uh, traditional account system, and that's the trigger solution that you mentioned.

00:07:17: Thomas Moser: And, uh, then given that SDX started, we, uh, we went very, uh, quickly into a test environment, and then since '20, uh, three we are in a production environment. So we are, we provide wholesale CBDC on that, uh, on that, uh, DLT exchange, so banks can use that to settle security, uh, transactions with, uh, wholesale CBDC.

00:07:44: Thomas Moser: And the second solution, so we, uh, we had it, uh, ready, but no one had requested it until you c- you came along with BX Digital, which I think is, uh, fascinating for us to actually see that also in production. Uh, we can learn a lot. We can also learn what the differences are between the two solutions and, uh, how you optimize, uh, each solution.

00:08:04: Thomas Moser: So I think this, this... I call it usually a horse race- Mm-hmm ... between these two solutions, I think is going to be very interesting for us.

00:08:11: Dr. Lidia Kurt: Mm-hmm. I mean, both solutions have, uh, benefits and also, uh, challenges, I would argue. Um, we see a lot of benefits of using existing systems where also the banks are al- already integrated.

00:08:24: Dr. Lidia Kurt: You don't have a, a separate money system for using trigger solution. At the same time, there are challenges, obviously. You are not on the same infrastructure level, which, which always brings certain challenges with it. Um, so for us it's very interesting also to, to research a bit more, uh, together with you, together, uh, also, um, uh, with SIX on, on how we can develop that further.

00:08:43: Dr. Lidia Kurt: On the CBDC side, um, are you actually the, the first one and, and only one as a national bank already have CBDCs in production out there?

00:08:51: Thomas Moser: I think we, uh, we were certainly the first one. I'm not sure whether we are still the, the only one. You always have to also be careful of... I mean, most of the other central banks focused early on on retail CBDC.

00:09:02: Dr. Lidia Kurt: Mm-hmm.

00:09:03: Thomas Moser: And we from the beginning said we don't really see a use case for retail CBDC in Switzerland, but we see a clear use case for wholesale CBDC, given that, that SIX is experimenting with it. So I think we were the first one. Um, certainly now other central banks are shifting towards wholesale CBDC, too.

00:09:19: Thomas Moser: Some are still, um, proceeding with retail CBDC, but we have clearly seen... In the beginning, we were almost the only ones, uh, really focused on wholesale CBDC, but I think all the other central banks have that, uh, now also in their focus.

00:09:33: Dr. Lidia Kurt: Yeah. And I think given also the, the system we have in Switzerland, and I believe also in many other countries where, where the central bank is in charge of the wholesale, uh, cash system, uh, makes a lot of sense to have th- this approach.

00:09:46: Dr. Lidia Kurt: Um, are there any thoughts to go at some point into retail CBDC, or that's for Switzerland just out of scope as an option? That's

00:09:51: Thomas Moser: at the moment out of scope. I mean, we would not say never never- Mm-hmm ... because you never know what happens - Yeah ... and, uh, how the situation evolves. But, but with, uh, the current situation, we don't really see a use case.

00:10:03: Thomas Moser: I mean, I always also imagine if we would issue a retail CBDC, why would I use it, you know? I have all these nice solutions. I have these card payments. I have these app payment possibilities. In order for me to r- use that, I would really need to have an incentive. I would need to be able to do something that I cannot do with all the other types of payments.

00:10:23: Thomas Moser: But other than that, it's difficult to see out, maybe out of curiosity I would probably do it, but, uh, why I would switch, I think that's the big challenge, uh, for central banks. And if you look at the, the, the few, I think there are about six retail CBDC live cases, uh, the, the take-up is very moderate.

00:10:43: Dr. Lidia Kurt: And isn't it that people will think, "Oh, I now have cash," which would be a bit of, you know, analogy to the, to the non-digital world.

00:10:49: Dr. Lidia Kurt: I have cash, which is, uh, a direct, um, connection that I have with the national bank. Now I have digital cash, which will be the, the retail CBDC. I totally understand what that would mean and imply in terms of the monetary system and, and what it would imply also for the commercial banks. But wouldn't that be the main reason why people would use retail CBDC, to have a cash and digital form?

00:11:08: Thomas Moser: So I think most people don't really think about who- Yeah ... issues the money for retail. I mean, whether you buy a coffee with, uh, with private money or with, uh, public money, I don't think most people don't really care about it as long as it works. Where it matters is, and that was interesting with SDX, if you talk with the, the banks and if you talk about large value payments, I think then this, this, uh, credit risk-

00:11:33: Dr. Lidia Kurt: Mm-hmm

00:11:34: Thomas Moser: uh, liquidity risk suddenly starts to play a role, which doesn't really play a role when you have little retail purchases. Yeah. But so the banks from the beginning told us we wa- and that's a big difference. You know, if you, if you ha- you mentioned what it means for the monetary system. If you say retail CBDC, you have all banks against you.

00:11:51: Thomas Moser: If you say wholesale CBDC, you have all banks supporting you because that's what they want.

00:11:55: Dr. Lidia Kurt: Yeah. Yeah. It, it's much easier to bring that, uh, to the table. Absolutely. And as said, I, I totally understand the approach, uh, especially in Switzerland. Um, now the CBDC that you have been building, as you said, are on, on the six SDX environment, uh, using p- private blockchain environment.

00:12:11: Dr. Lidia Kurt: Uh, you knowing obviously I'm, I'm a big fan also of public blockchain environment, so, so let me ask the question, uh, do you see any future to have CBDC also on public rails?

00:12:19: Thomas Moser: That's certainly so- something we have to look into, and I think that's the, also one of the interesting differences between, uh, uh, BX, uh, Digital and, uh, SDX because BX Digital is on a public blockchain.

00:12:33: Thomas Moser: Uh, and I guess that's also one of the reasons why we are using the trigger solution because central banks, including us, are at this stage not ready to go on a, on a public permission-less blockchain with a CBDC. Mm-hmm. But I think- I, I, I, I also, uh, in the camp of those who thinks that there are so many benefits of these public, uh, blockchains.

00:12:55: Thomas Moser: I think the main challenges for central banks are, I would say, at least three or four. One is, of course, you lose control over your infrastructure. Now, you could say in Switzerland, uh, we have, we mandated, uh, uh, SIX to run our financial market infrastructure, but at least you have someone to talk to, and you can say, "I would like to have this changed and this changed, and I can pay you to have this changed."

00:13:17: Thomas Moser: So on a public blockchain, I think that's one of the challenges. It's, it's not, you know, it's not a no, an absolute no, but something that central banks have to figure out how you, how do you exit, how you have exit plans ready and stuff like if something happens on that, uh, public infrastructure that, that you don't like or that isn't helpful for, to the central bank.

00:13:37: Thomas Moser: So this is one of the concerns. The other one is, um, uh, the finality of settlement, which depends how you do it. Um, I mean, you know that-

00:13:46: Dr. Lidia Kurt: Mm-hmm ...

00:13:46: Thomas Moser: uh, better than I do. But, uh, so y- you have to make sure that you have a, a deterministic, uh, settlement that you really know now the, the, the, the transaction is settled.

00:13:59: Thomas Moser: Uh, you cannot revoke it, so that has to be very clear from a legal and, and, and, uh, perspective certainly, but technically that's clearly different on a public or most public blockchains than it is, uh, in a private system. And, uh, the third one is actually privacy, uh, which, uh, which matters. And it's, uh, it's not that easy to get a good privacy solution on a public permissionless blockchain for, for at least the, the, the things that you want to keep private or confidential.

00:14:28: Thomas Moser: Uh, so that's also ... This, I think these are the main concerns. Early on, a lot of central banks were worried about access, but I think that's, uh, a- and compliance, but I think, uh, several, uh, use cases have shown that this is something that you can address relatively well on a, on a public permissionless

00:14:47: Dr. Lidia Kurt: blockchain.

00:14:48: Dr. Lidia Kurt: Yeah. And I think those are the three very valid points that, as you said, we know very well as well and, and, uh, for some have found solutions for still, some still working on them as well. Um, yeah, no, very interesting. Thanks for sharing that. Um, looking a bit also, we have been mentioning on how the roles might change in terms of if you would have wholesale or retail CBDC.

00:15:06: Dr. Lidia Kurt: But if we look at also privately issued digital cash, stablecoins as an example, uh, tokenized deposits as another, um, do you see a bit of a shift also in terms of the roles in our industry, like who does what? Um, are the banks still the ones in charge of, of issuing money to the private, uh, the retail sector, or how does that change in the future?

00:15:29: Dr. Lidia Kurt: Yeah.

00:15:30: Thomas Moser: I mean, stablecoins are the talk of the town.

00:15:32: Dr. Lidia Kurt: Mm-hmm.

00:15:33: Thomas Moser: Clearly, I think all central banks are talking about, uh, stablecoins. All banks are talking about stablecoins. I think this is a, a, a, a real challenge, first of all, for banks Because they, they lose certain functions that they naturally had. Uh, I mean, they have been losing payment functions to, to fintechs, uh, already, but I think all these, uh, payments were so far still kind of account to account.

00:15:58: Thomas Moser: It just was a question of, of who basically provides that service. But, uh, you could say electronic money might have been the exception, but never really took off. And now with stablecoins, you clearly have something there where funds leave the banking system. And now with stablecoins being on public permissionless blockchains, you can do a lot of things that have not been possible before.

00:16:22: Thomas Moser: Uh, and you see that happening on Ethereum with, uh, very complicated trades that, uh, uh, just very sophisticated, uh, uh, stuff. So I think the first reaction of the commercial banks was, uh, to, to provide tokenized deposits to somehow keep that, uh, banking relationship So it will be interesting also to see how that, um, so how that works out.

00:16:46: Thomas Moser: My, my, uh, guess is that in the end we will have a mix of these different types of money, but, uh, but for central banks, of course, the main question is how d- how... If, if stable coins really take off and take funds out of the banking system, so the question then is, uh, how does it, uh, affect monetary policy transmission?

00:17:07: Thomas Moser: It still works, but it, but it will be different. And the other, uh, question, of course, is the one of financial stability, uh, especially if you have these, uh, these flows out of the banking system, uh, irregularly. So these are interesting questions that, uh, that, uh, come up.

00:17:23: Dr. Lidia Kurt: Mm-hmm. I mean, we see those shift in roles not only on the cash side, but also on the, on the asset side.

00:17:29: Dr. Lidia Kurt: We see that a lot of benefits, uh, uh, when using blockchain, there are a lot of benefits. Also, for example, of going more direct routes, peer-to-peer routes, and not through, uh, the existing entities anymore. Interme- So you, you can reduce the number of intermediaries involved, uh, be it domestic, be it, uh, through cross-border settlement.

00:17:49: Dr. Lidia Kurt: What's your opinion on that? I mean, you're more on the cash side, I understand, as national bank, but obviously you're looking very much on the asset side as well.

00:17:55: Thomas Moser: Yeah. I mean, this, this peer-to-peer functionality that the DLT offers, I think that's, as you said, that's one of the great, uh, advantages, but also one of the great challenges for everyone who was in, in that chain before, in that, uh, flow chain.

00:18:11: Thomas Moser: And I think for cross-border it's, uh, it's so obvious that you don't really have these borders anymore. Uh, you don't have this correspondent banking system or, or you don't need to have it on the blockchain. So I think that's, that's clearly one of the most interesting aspects. And the other one is, uh, as, I mean, when you talk about assets is if just the, the possibility to automate processes, um, which you can, uh, you can program these assets, and, uh, I think that's also something that...

00:18:41: Thomas Moser: So I think at this stage we are still, uh, we are still at the, at the stage where we more or less replicate what already exists. But I think the next stage will be the real revolutionary one when you d- start doing things that do not exist. I always kind of compare it with, uh, the digitalization of music because that's one of my hobbies, music.

00:19:00: Thomas Moser: So first, you know, when the CD came out, it was the same thing as the vinyl record. You just had it on a d- on a, on a different disc, and everyone had to buy the same, the same records again, and now this time on a CD. And later on, streaming came, and streaming really changed the music industry, and then you can do things that you couldn't do, uh, before.

00:19:20: Thomas Moser: And I'm s- kind of, uh, expecting the same to happen with, uh, blockchain technology.

00:19:25: Dr. Lidia Kurt: That's a very, very good point. We have that discussion quite a bit as well. So it's not only about replicating processes, but maybe also about generating a new market that is not there yet.

00:19:35: Thomas Moser: Yeah. Yeah.

00:19:35: Dr. Lidia Kurt: Uh, we often bring the example also of like when the internet came of like, or the smartphone came, uh, so mobile internet came, and you were looking at your Excel spreadsheet on, on your smartphone.

00:19:44: Dr. Lidia Kurt: It was like, okay, that's not very much better than looking at it on a laptop. Uh, but then once Insta, uh, and Uber and so on started, all use cases that wouldn't have existed before- Yeah ... without mobile internet. Yeah. Do you see those... I mean, it's obviously very difficult now to see those future use cases.

00:20:00: Dr. Lidia Kurt: Do you have any idea, or do you see glimpses of first use cases of what, like, those streaming type of use cases could be?

00:20:07: Thomas Moser: I think one use case, um, and that will be also a challenge also for, for, uh, central banks, is that you have, uh, the possibility now to have, uh, intraday, uh, interest payments. Yeah. So I mean, we have some, some of these use cases already.

00:20:23: Thomas Moser: We see them where you pay interests every six or seven seconds, and that's clearly a different world. And I think for treasurers, this is a dream ... come true. You can park your money for- Yeah ... a couple of hours somewhere and, and earn interest. Uh, for central banks, of course, the whole question of, uh, of providing liquidity.

00:20:41: Thomas Moser: So far, we, we provide intraday liquidity, uh, interest free. So I think we also have to rethink, uh, our own processes when we provide liquidity not to, you know, these arbitrage possibilities, I think are, are very interesting, but it, it will clearly require some, some thinking through of our own report transactions and, and our own liquidity facilities in, if that really becomes a new world.

00:21:06: Dr. Lidia Kurt: Yeah. Also, uh, thinking about the roles we have been discussing before, it could also be an opportunity, like, ha- have, like, maybe more possibilities to have financial stability and your, your possibility to actually transmit, uh, your monetary decisions to the, to the larger public.

00:21:21: Thomas Moser: Yeah. No, absolutely. There are, I mean, as always, there are opportunities and, and risks at the same time.

00:21:26: Dr. Lidia Kurt: Yeah. Yeah. So looking at where we are heading into the future, right? Um, maybe let's look at five to 10 years, uh, into the future. Do you see digital money or also digital asset as being part of our core infrastructure already, or do you think that takes much longer than that?

00:21:45: Thomas Moser: I, I tend to think it, it takes longer than you usually think.

00:21:49: Thomas Moser: I mean, there, there's this famous saying something like, "It takes usually longer than you think." But- Yeah ... but then with hindsight, it's, it has really changed everything and became faster than you expected. So I think we will live in a kind of a hybrid world for quite some time, but the digital component I think will, will become increasingly more, uh, more important.

00:22:09: Thomas Moser: I think what's, what's important to have this, you talked about the iPhone. You know, what really, um, made the iPhone become, uh, much more useful is the whole ecosystem. So, and, and growing an ecosystem takes time, but I think in the end that's really what you need because then you have, uh, uh, then you have the new use cases if you have, uh, new companies coming up, new, new, uh, business models, and it's very difficult to predict what that will be.

00:22:37: Thomas Moser: Like with the iPhone, uh, y- I mean, I think it's a very good example.

00:22:41: Dr. Lidia Kurt: Yeah. And doesn't it also require a bit of a open ecosystem approach, right? You need, you need an app store where everyone- Yeah, exactly. Yeah ... can program apps on it, and you don't wanna control everything.

00:22:50: Thomas Moser: Yeah. That- And that's the connection to the public permissionless blockchain.

00:22:53: Dr. Lidia Kurt: Yeah. Well, it could also be an- Exactly ... a pro- and it just m- Yeah ... also that it shouldn't be like a closed ecosystem. Yeah. And that's something we, we try to promote, that we are not building silos again- Yeah ... where we just build- Exactly ... something and, and no one can connect to it, no one can build on it, but really have something which is an industry solution that everyone, uh, can actually use.

00:23:10: Thomas Moser: Yeah, absolutely. And I mean, the, the, the public permission blockchains are, uh- Where you, this composability that you have of these different trades, I think this is really what makes it interesting. And, and then you see some of these, there was just recently this, uh, paper that was co-authored by Fabian Schär by the BIS, and they basically look at the complexity of some of these trades, and it's amazing.

00:23:33: Thomas Moser: You have, like, hundreds of trades packed into an atomic trade, uh, which, uh, is just fascinating to see.

00:23:41: Dr. Lidia Kurt: Yeah. We can also link that paper, uh, in, in the show notes so that everyone can, can read through that. Um, maybe as a last question, um, if you would have a wish for, for the industry, for the National Bank, or for the banks, or, or for anyone out there, what would that be in order for bringing that digital asset ecosystem a step further?

00:23:59: Thomas Moser: I think the most important, and I think we have a, a very good, um, uh, framework for that in Switzerland, is that, that everyone talks with everyone, you know. You really ... Like, you shouldn't build technologically, uh, silos. You also shouldn't work in silos. So exchanging information, talking to each other, like we do now, uh, and, uh, like we have several, uh, forums for that in Switzerland, Silicon Valley.

00:24:24: Thomas Moser: Uh, we have this Point Zero that just happened. I think that's, that's very important that people talk to each other, learn from each other, uh, and that's how we can build a, a, a great financial system.

00:24:35: Dr. Lidia Kurt: Yeah. I think those are very good last words, uh, for our podcast. So thank you very much for being here. It was a very interesting discussion as always.

00:24:42: Dr. Lidia Kurt: I'm very much looking forward to maybe at some point also talk again in this format.

00:24:47: Thomas Moser: Absolutely. Thank you very much, Lydia.

00:24:49: Dr. Lidia Kurt: This was Inside Digital Assets, a joint project by BX Digital and Centurion. If you enjoyed this episode, subscribe to our podcast and feel free to share with others.