The Swiss Bankers Association, seeing considerable space for the development of digital assets in the country, is issuing a new proposal. It is presented in a white paper and calls for the creation of a deposit token in the Swiss franc.
Tokenization is progressing
According to the latest report, stablecoins, despite their growing popularity, do not play any significant role in the Swiss financial system. Moreover, the market is not aware of Swiss stablecoins being available to the wider community.
As a result, the report’s authors propose the introduction of a new variant of stablecoin, a deposit token issued by regulated and supervised intermediaries, redeemable through smart contracts and denominated in Swiss francs. The token would be based on a ledger-based security rather than a set of instructions. Such a solution would provide it with greater potential.
The report also points to three design options for this solution: standardized tokens, which could be issued by each commercial bank according to uniform guidelines; colored tokens, issued by commercial banks according to standards of their choice; and joint tokens issued by a licensed and supervised special purpose vehicle made up of participating banks. The report’s authors unanimously agreed on the last option as the most appropriate.
Advantages from the implementation of a new cryptocurrency solution
A common deposit token, experts argue, would be a significant convenience affecting money creation. All due to its flexibility, low fees, as well as the possibility of earning interest. At the same time, it would be less susceptible to all kinds of attacks than a solution stimulated by individual banks. As representatives of the Association report:
“From a technical point of view, all the economic and legal requirements that have been identified can be met. In principle, DT should run on a public blockchain with additional protocols to ensure sufficient privacy and transaction efficiency.”
The idea is that the token could also be a layer two solution, which would enable its use in DeFi. Such a feature would also give the user the choice of storing the assets themselves, or entrusting them to a bank.
A new discovery in the world of cryptocurrencies
Deposit tokens are relatively new to the world of cryptocurrencies. According to an article recently published in The Washington Post, they were created as part of the Monetary Authority of Singapore’s Project Guardian initiative, which was launched in May 2022, in cooperation with several financial institutions. The goal of the initiative was to study the effects of implementing DeFi technology in the markets.
As part of Project Guardian, JPMorgan – one of the participants – made the first DeFi transaction on a public blockchain. In February of this year, the aforementioned bank and another project participant, Oliver Wyman, published a document discussing the advantages of deposit token technology.