3  2  3  Cf. Committee on Payment and Settlement Systems (now Committee on Payments and Market Infrastructures, CPMI) and Technical Committee of the International Organization of Securities Commissions (IOSCO), ‘Principles for financial market infrastructures’, April 2012. The Federal Intermediated Securities Act (FISA) introduced in Switzerland in 2008 is a good example of a regulatory change – in this case designed to manage the transition to dematerialised securities at central depositories. Dematerialisation and the associated regulatory changes also significantly improved the efficiency and safety of repo settlement and hence of monetary policy implementation. Page 3/6  From centralisation to decentralisation – how far should it go? Until very recently, safety and efficiency were considered to be functions of centralisation. This trend is reflected in the evolution of central securities depositories 4 and in the emergence of cashless payment transactions. In Switzerland, centralised clearing houses in the 1940s and centralised data processing in the 1970s were waypoints on a journey of convergence. This development culminated in the creation of the centralised ‘Swiss Interbank Clearing’ (SIC) payment system in 1987. 5 Another – more recent – example is the settlement of OTC derivatives via central counterparties. 6 This centralisation process and related economies of scale both reduced costs and improved safety. However, with the arrival of the latest technologies, these third-party clearing and settlement services are increasingly seen as superfluous cost factors; the keywords here are ‘distributed ledger’ and ‘blockchain’. 7 The underlying technology promises first and foremost to reduce costs.

In 1949, the banks started bundling interbank transactions in various clearing houses categorised according to bank type. Thirty years later, in 1979, the data processing systems of these clearing houses were also centralised. This laid the groundwork for the current SIC system, launched in 1987, which has led to the centralisation and standardisation of all Swiss interbank payment transactions via SNB sight deposit accounts. Cf. Fritz Klein and Guido Palazzo, ‘Kulturgeschichte des Geldflusses. Die Entwicklung des Zahlungsverkehrs mit Fokus Schweiz’, 2003, Verlag SKV. The G20 countries committed to the principle of settling OTC derivatives via central counterparties at the Toronto Summit in 2010 before passing national legislation on the matter (art. 97 of the Financial Market Infrastructure Act [FMIA] in Switzerland, the European Market Infrastructure Regulation [EMIR] in the European Union, and the Dodd-Frank Act in the US). The terms ‘distributed ledger’ and ‘blockchain’ describe a concept that enables the operation of a distributed, synchronised database. Such a database allows participants to exchange digital assets without involving a centralised third party. Page 4/6  Such new technology is highly relevant for central banks, especially in the context of the ongoing debate about central bank money potentially being issued via a distributed ledger. This idea raises a host of central bank-specific questions that will need to be examined in more detail. The SNB is following and analysing developments in this arena closely and is actively involved in discussions with market participants, regulators and other central banks.