The Swiss Bankers Association released a white paper suggesting the digitalisation of the Swiss financial system requires a Swiss franc joint deposit token
The Swiss Bankers Association published a white paper on the deposit token – “new money for digital Switzerland”.
The group settled on a Swiss franc joint deposit token as the most viable solution for promoting innovation in the Swiss financial system. That is a deposit token “issued by regulated and adequately supervised intermediaries” denominated in Swiss francs. The token, issued and redeemed by smart contracts, could be designed as a ledger-based security, rather than a set of instructions.
Among three possible design options for a deposit token, the institution finds the “joint” alternative the most viable and beneficial for the Swiss economy. In this token model, a licensed consortium of commercial banks will issue digital francs and supervise their redemption.
The concept presupposes a digital currency existing in the form of tokenised deposits based on distributed ledger technology (DLT). It resembles stablecoins, being tied to the stable national currency. If designed carefully, the joint deposit token would “allow for a wide range of new applications, reduce risks, increase efficiency, and open up whole new areas of business.”
The benefits of the proposed digital currency solution include its flexibility, low fees and the possibility to earn interest in savings accounts. Furthermore, the joint token would be less liable to runs than tokens issued by individual banks.
In a perfect scenario, the proposed token would be a layer-2 solution usable in decentralized finance (DeFi) applications and stored under both self-custody and bank custody.
Similar token systems were explored within the Project Guardian, a collaborative cross-industry effort, led by the Monetary Authority of Singapore (MAS). Singaporean financial institutions have conducted advanced experiments with cryptocurrency and DeFi, even applying the concept to foreign exchange (FX) and government securities trading.