• Thu. Mar 30th, 2023

Swiss Bankers Association proposes deposit tokens to create digital economy


Mar 17, 2023

The Swiss Bankers Association released a white paper on how Swiss banks can assistance the improvement of the country’s digital economy. A Swiss franc “joint” deposit token is the option the group settled on. 

Stablecoins have restricted penetration in the Swiss economic technique, even as finish-to-finish digitization is becoming extra frequent in enterprise models, and no Swiss stablecoins are accessible by the common public, the paper says.

The authors of the paper recommend a wide variety of stablecoins — that is, a deposit token “issued by regulated and adequately supervised intermediaries” — issued and redeemed by sensible contracts and denominated in Swiss francs. The token could be created as a ledger-primarily based safety, rather than a set of guidelines, to present it with the greatest possible.

The paper identifies 3 style alternatives for a deposit token: Standardized tokens that any industrial bank can challenge with a uniform normal, colored tokens that are issued by industrial banks to any requirements they opt for, and joint tokens that are issued by a licensed and supervised unique objective car consisting of participating banks. The authors favor the final decision.

Comparison of digital types of cash. Supply: SBA

A joint deposit token would facilitate cash creation due to its flexibility, have low charges and could earn interest when held in bank accounts. It would be much less liable to runs than tokens issued by person banks. Moreover:

“From a technical standpoint, all the financial and legal needs that have been identified can be met. […] In principle, the DT really should operate on a public blockchain with further protocols to make sure adequate privacy and transaction efficiency.”

The token would ideally be a layer-two option usable in decentralized finance (DeFi) applications and capable of self-custody or bank custody.

The Swiss Bankers Association (SBA) has published a white paper on a digital Swiss franc, in which it outlines different styles of tokenised deposits on the blockchain https://t.co/SsPwziNRRm

— Central Bank Payments News (@cbpaymentsnews) March 14, 2023

Deposit tokens are a relative newcomer to the ranks of digital currencies. According to a current overview in The Washington Post, they originated in Project Guardian, an initiative the Monetary Authority of Singapore launched with a number of economic institutions in May well 2022 that sought to discover DeFi applications in wholesale funding markets.

Associated: Bitcoin Suisse explains why Swiss is a crypto pivot point: Davos 2023

JPMorgan, a single of the participants in Project Guardian, executed the very first DeFi trade on a public blockchain as component of that project. JPMorgan and project participant Oliver Wyman released a paper discussing the merits of deposit token technologies in February.

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