Trial of Swiss deposit token shows banks can adopt digital money reliably
The pilot demonstrates how blockchain can work alongside traditional banking systems
The Swiss Bankers Association (SBA) is taking steps to establish a digital Swiss franc known as the deposit token. In September, PostFinance AG, Sygnum Bank AG, and UBS Group AG conducted a Proof of Concept, using deposit tokens to execute legally binding cross-bank payments on a public blockchain.
The token was implemented through a public blockchain alongside the Swiss inter-bank clearing system for settlement. Many believe that Switzerland is using the token to modernise its payments infrastructure by providing deposits that can be used on-chain while remaining locked in the banking system. The token is also being primed to support new business models, such as asset tokenization, machine-to-machine payments, and escrow automation.
Calvin Taylor, chief financial officer at D24 Fintech, said, “The deposit token represents a landmark development that offers a compelling glimpse into the future of banking and financial infrastructure. Emerging from Switzerland, one of the spiritual homes of international finance, this initiative illustrates how blockchain technology is prompting banks to reevaluate the very foundations of their financial infrastructure in the digital age.
“In recent years, we have witnessed the tokenization of an increasingly wide range of assets, including commodities, carbon credits, real estate, and art. It was only a matter of time before the same principles and technology were successfully implemented for bank deposits and financial settlements. The deposit token is more than a technological experiment. It demonstrates how regulated institutions can issue digital forms of currencies that combine the safety and legal certainty of traditional deposits with the efficiency, programmability, and 24/7 availability of blockchain systems.
“For the wider financial ecosystem, the study demonstrates the potential for the benefits of blockchain, including instant settlement across institutions, reduced counterparty and liquidity risk, improved transparency, and the potential for autonomous, smart-contract-based payments,” added Taylor. “Central banks and regulators now need to adapt quickly to ensure that frameworks for monetary policy, oversight, and insurance are robust while being forward-looking in this new environment.
“We could soon see participating Swiss banks announce a commercial offering based on the deposit token infrastructure, with regulatory guidance or legislation in Switzerland stating how deposit tokens are treated.
“Ultimately, the deposit token underscores a pivotal shift in global finance – from static ledgers and intermediate trust toward a tokenised, programmable, and interoperable financial system. Those banks and regulators that embrace this evolution will help shape the next generation of secure, efficient, and innovative digital money. Those who hesitate risk being left behind,” concluded Taylor.