The Swiss Bankers Association has published a white paper on how Swiss banks can help the improvement of the country’s digital economy. A “shared” Swiss franc deposit token is the answer the group has opted for.
Stablecoins have restricted penetration in the Swiss monetary technique, even as finish-to-finish digitization is increasingly widespread in organization models, and no Swiss stablecoin is accessible to the basic public, the paper stated.
The paper’s authors propose a series of stablecoins — that is, token deposits “issued by regulated and adequately supervised intermediaries” — that are issued and redeemed by clever contracts and denominated in Swiss francs. The token could be created as a ledger-primarily based safety, rather than a set of directions, to give it its greatest prospective.
The paper identifies 3 design and style choices for a deposit token: standardized tokens that each and every industrial bank can concern with a exceptional normal, colored tokens issued by industrial banks according to any normal they pick out, and widespread tokens issued by a licensed and supervised particular goal car created up of banks participants. The authors choose the latter option.
Comparison of digital types of income. Supply: SBA
A shared deposit token would facilitate income creation due to its flexibility, would have low charges and could earn interest when held in bank accounts. It would be much less susceptible to a run than tokens issued by person banks. Follows:
“From a technical point of view, all the financial and legal specifications that have been identified can be met.” […] In principle, DT really should operate on a public blockchain with more protocols to make sure adequate privacy and efficiency of transactions.
The token would ideally be a layer two answer that can be employed in Decentralized Finance (DeFi) applications and capable of self or bank custody.
Deposit tokens are comparatively new in the ranks of digital currencies. According to a current assessment in The Washington Post, they originated in Project Guardian, an initiative launched by the Monetary Authority of Singapore with various monetary institutions in May possibly 2022, which sought to discover DeFi applications in wholesale funding markets.
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JPMorgan, a single of the participants in Project Guardian, created the initial DeFi trade on a public blockchain as element of that project. JPMorgan and project participant Oliver Wyman published a paper in February discussing the advantages of deposit token technologies.