• Tue. Mar 28th, 2023

Swiss Bankers Association proposes deposit tokens to create digital economy


Mar 16, 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 answer the group settled on. 

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

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

The paper identifies 3 design and style solutions for a deposit token: Standardized tokens that any industrial bank can situation with a uniform normal, colored tokens that are issued by industrial banks to any requirements they decide on, and joint tokens that are issued by a licensed and supervised particular goal automobile consisting of participating banks. The authors choose the final option.

Comparison of digital types of revenue. Supply: SBA

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

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

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

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 Could 2022 that sought to discover DeFi applications in wholesale funding markets.

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

JPMorgan, one particular of the participants in Project Guardian, executed the initially DeFi trade on a public blockchain as portion 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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