Good day everyone,
I hope you are all having a good day, welcome to CryptoGod-1's blog on all things crypto. In this post I will be looking at an initiative by a group of Swiss Banks to release a digital token of the Swiss Franc.
Swiss Banks
A group of leading banks in Switzerland are looking to modernise the Swiss Financial System while also increasing its competitiveness in the digital age. They aim to do this by creating a digital token, the digital Swiss Franc. The banks in question are PostFinance, UBS, and Sygnum, and their initiative is being pushed by the Swiss Bankers Association (Schweizerische Bankiervereinigung, or SBVg). Overall their aim is to bring Switzerland into the modern age via their financial system and they hope it may just give them the competitive edge going forward.
The project is known as “Digitale Währungen”, or in English “Digital Currencies.” It has gained traction and support from large Swiss banks as they signed a memorandum of understanding (MoU) to jointly conduct a Proof of Concept (PoC) for a digital Swiss franc deposit token. This deposit token will be a blockchain based payment method according to the MoU and it will mirror traditional deposits. It will also allow bank customers to make new transactions a new and innovative payment platform using distributed ledger technology (DLT) along with smart contracts.
There will be three main types of tokens according to the Swiss Banking Association. They are as follows:
Each deposit token type will represent a different economic, legal or technical characteristic. The Deposit Token PoC will have two main use cases, with the first being simple payments between participating banks, and the second being delivery versus payment transactions with escrow functions. According to the Swiss Bankers Association a successful PoC would have the potential to pave the way for the widespread adoption of a digital Swiss Franc. This could in turn offer several benefits such as faster and cheaper transactions along with enhanced security. There will also be the potential of new financial products and services.
The reasoning behind the MoU of the Swiss Banks is to address the need for coordination within the broader context of the Swiss Bankers Association’s work on digital currencies. It has been agreed that the banks who signed the MoU intend to “design, execute and assess an initial Deposit Token PoC”. They will also work together to address any legal or operational challenges which may come about from the work done on the project, along with evaluating any potential benefits and challenges of a nationwide rollout. This will include the consideration of “technical, legal, economic, risk, and operational factors.” The project is expected to be completed by 2025.
The trio of banks, PostFinance, UBS, and Sygnum, and piloting this blockchain-based system to see if they can migrate customer deposits. These are imperative to banking operations and according to Remo Nyffenegger, an economist at the University of Basel, this is a much more radical step than banks merely allowing their customers to invest in Bitcoin and other digital assets. This is more about the banks understanding and making use of the underlying technology of blockchain. He noted:
“As far as I know, this is the first time that deposit money has been issued directly on a blockchain. It’s a very innovative move by the Swiss banks.”
There are many regulatory hurdles to overcome before the system can become regular use for the public, such as determining the rules for cross-border use and the required backing of assets. Nyffenegger also stated:
“If they opt for a public blockchain, as suggested in their whitepaper, it would be truly revolutionary. Transactions on public blockchains are transparent to everyone.”
This is not the only blockchain or digital asset based initiative within Switzerland, as the nation has seen their banks become more involved in cryptocurrency trading. The Zurich Cantonal Bank (known locally as Zürcher Kantonalbank, or ZKB) is one of the largest banks in Switzerland and is the latest financial institution to begin offering cryptocurrency trading services to its customers. This began on the 4th of September 2024, and customers of ZKB are now able to trade both Bitcoin and Ether through the ZKB eBanking or ZKB Mobile Banking platforms.
Back in June the Swiss National Bank (SNB) announced it would be the world's first central bank to ‘carry out a monetary policy operation in a live production environment’ using distributed-ledger technology’ (DLT). This was undertaken as part of their fintech-related innovation focus and they successfully issued digital SNB bills on the SIX Digital Exchange (SDX). The token-based bills, which had an issuance volume of CHF 64 million (about £56.6m/$71.6m), and had a one-week term.
Have a great day.
Peace. CryptoGod-1.
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