### Swiss Banks Collaborate on Blockchain-Driven Deposit Tokens
**Banking**
**Blockchain**
**Switzerland**
In an ambitious move to enhance the Swiss financial landscape and bolster its competitiveness in the digital era, leading Swiss banks are uniting to explore a blockchain-based digital Swiss franc.
**Last updated:**
September 23, 2024 10:23 EDT
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In a groundbreaking initiative, prominent Swiss banks—PostFinance, UBS, and Sygnum—have come together to assess the viability of a digital Swiss franc. This effort, led by the Swiss Bankers Association (Schweizerische Bankiervereinigung, or SBVg), seeks to modernize the country’s financial system and enhance its competitiveness in the digital economy.
### Blockchain-Enhanced Digital Franc
The project, titled “Digitale Währungen” (Digital Currencies), has received backing from major Swiss banks that have signed a memorandum of understanding (MoU) to collaboratively undertake a Proof of Concept (PoC) for a digital deposit token linked to the Swiss franc.
According to the MoU, this deposit token represents a blockchain-based payment method that emulates traditional deposits, enabling customers to transact via an innovative payment platform utilizing distributed ledger technology (DLT) and smart contracts.
*Three distinct types of the Deposit Token featuring varying economic, legal, and technical characteristics. Source: Swiss Bankers Association*
The initial phase of the Deposit Token PoC will target two primary use cases: straightforward payments among participating banks and delivery versus payment transactions incorporating escrow features. The Swiss Bankers Association believes that a successful PoC could facilitate the widespread implementation of a digital Swiss franc, leading to quicker, more cost-effective transactions, improved security, and the development of new financial products and services.
### A Unified Approach
The MoU aims to foster collaboration among the banks within the broader framework of the Swiss Bankers Association’s efforts regarding digital currencies. The signatory banks plan to “design, execute, and evaluate an initial Deposit Token PoC.” Furthermore, they will jointly tackle any legal or operational challenges that may emerge during the project and assess the potential risks and benefits of a nationwide deployment of a digital Swiss franc, considering various factors including technical, legal, economic, and operational aspects. The completion of the Deposit Token PoC is anticipated by 2025.
### Blockchain-Driven Banking
Essentially, PostFinance, UBS, and Sygnum are testing a blockchain-based framework to determine the feasibility of transitioning customer deposits, a core aspect of banking functions. Remo Nyffenegger, an economist at the University of Basel, remarked in the *Neue Zürcher Zeitung* that this initiative represents a much bolder step than allowing customers of cantonal banks to invest in Bitcoin (BTC) and other digital assets; it focuses on banks leveraging the underlying technology by developing services directly on a public blockchain like Ethereum.
However, Nyffenegger pointed out that significant regulatory challenges must be addressed, including establishing rules for cross-border transactions and asset backing requirements. “If they choose a public blockchain, as indicated in their whitepaper, it would be revolutionary. Transactions on public blockchains are open to everyone,” he noted.
### Swiss Banks Embrace Crypto Trading
In addition to the digital franc project, Swiss banks are also making strides in cryptocurrency trading. Zurich Cantonal Bank (Zürcher Kantonalbank, or ZKB), one of Switzerland’s largest banks, recently launched cryptocurrency trading services for its customers. As of September 4, ZKB clients can trade Bitcoin and Ether (ETH) around the clock via the ZKB eBanking and ZKB Mobile Banking platforms.
Recently, several other Swiss cantonal banks, including Zuger Kantonalbank, St. Galler Kantonalbank, and Luzerner Kantonalbank, have successfully introduced cryptocurrency services.
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