Swiss Banks Join Forces for Blockchain-Based Deposit Token
2024-09-23

Leading Swiss banks – PostFinance, UBS, and Sygnum – have joined forces to explore the feasibility of a digital Swiss franc. 
The initiative, by the Swiss Bankers Association (Schweizerische Bankiervereinigung, or SBVg), aims to modernize Switzerland’s financial system and strengthen its competitive edge in the digital economy.Blockchain-Based Digital Franc
The project, known as “Digitale Währungen”, or in English “Digital Currencies”, garnered support from large Swiss banks, which signed a to jointly conduct a Proof of Concept (PoC) for a digital Swiss franc deposit token.
A deposit token, according to the MoU, is a blockchain-based payment method that mirrors traditional deposits. It allows bank customers to make transactions on a new and innovative payment platform using distributed ledger technology (DLT) and smart contracts.  Three main types of the Deposit Token with different economic, legal and technical characteristics. Source: Swiss Bankers Association
Initially, the Deposit Token PoC will focus on two use cases: simple payments between participating banks and delivery versus payment transactions with escrow functions.
A successful PoC, according to the Swiss Bankers Association, could pave the way for the widespread adoption of a digital Swiss franc, offering several benefits such as faster and cheaper transactions, enhanced security, and new financial products and services.A Collaborative Effort
The MoU among the Swiss banks aims to address the need for coordination within the broader context of the Swiss Bankers Association’s work on digital currencies. 
Firstly, the banks that signed the MoU intend to “design, execute and assess an initial Deposit Token PoC”. 
Secondly, the banks will work together to address any legal or operational challenges that may arise during the project as well as evaluate the potential benefits and challenges of a nationwide rollout of a digital Swiss franc, considering “technical, legal, economic, risk, and operational factors.”
The Deposit Token PoC project is expected to be completed in 2025.Blockchain-Powered Banking
In essence, PostFinance, UBS, and Sygnum are piloting a blockchain-based system to see if they can migrate customer deposits, which are fundamental to banking operations.
According to Remo Nyffenegger, an economist at the University of Basel, who on these plans for the Neue Zürcher Zeitung, this is a far more radical step than, for example, cantonal banks allowing their customers to invest in Bitcoin (BTC) and other digital assets. It’s more about banks using the underlying technology themselves or even building services directly on top of a public blockchain like Ethereum.
 “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.”
But there are significant regulatory hurdles to overcome, said Nyffenegger, such as determining the rules for cross-border use and the required backing of assets. “If they opt for a public blockchain, as suggested in their , it would be truly revolutionary. Transactions on public blockchains are transparent to everyone.”Swiss Banks Adopt Crypto Trading
In addition to the digital franc initiative, Swiss banks are also actively involved in cryptocurrency trading. 
Zurich Cantonal Bank (known locally as Zürcher Kantonalbank, or ZKB), one of the largest banks in Switzerland, has become the latest financial institution to offer cryptocurrency trading services to its customers. Starting on Sept. 4, ZKB customers are able to trade Bitcoin and Ether (ETH) around the clock directly through the ZKB eBanking or ZKB Mobile Banking platforms.
Ab heute ermöglicht die Zürcher Kantonalbank den Handel und die sichere Verwahrung von und . Das Angebot ist nahtlos in die bestehenden Kanäle integriert und richtet sich gleichermassen an Kundinnen und Kunden sowie an Drittbanken: 
— Zürcher Kantonalbank (@zkb_ch) 
In recent months, several Swiss cantonal (government-owned commercial) banks, including Zuger Kantonalbank, , and Luzerner Kantonalbank, have also successfully launched cryptocurrency services.