TL;DR
Three Swiss banks—UBS, PostFinance, and Sygnum—successfully carried out a legally binding payment using tokenized deposits on the public Ethereum blockchain, as part of a pilot supervised by the Swiss Bankers Association (SBA).
The proof of concept demonstrated that it is possible to execute legally valid transactions directly on the blockchain without relying on traditional payment systems, opening new opportunities for efficiency and automation in the financial sector.
The project used deposit tokens, digital representations of bank deposits that can be transferred between institutions. These tokens allowed payments to be legally settled between banks within a permissioned framework, ensuring regulatory compliance and counterparty risk coverage. The pilot tested two main use cases: peer-to-peer payments between customers of different banks and an escrow-like setup where deposit tokens were exchanged for tokenized assets.
A key advantage of deposit tokens is that transfers can be processed immediately and linked to programmable conditions via smart contracts. For example, a securities trade could settle automatically once ownership is transferred, or an insurance payout could trigger as soon as a claim is validated. This overcomes the limitations of traditional payment systems, which do not support automated conditions or seamless integration with blockchain-based markets.
According to Sygnum, the tokenized deposits in this pilot can be transferred across different banks, which was previously not possible in Switzerland. While other institutions, such as JPMorgan, have also tokenized deposits, their use was restricted internally. Thomas Frei, Head of Innovation at Sygnum, stated that this approach represents an alternative to stablecoins and opens the door to faster, more secure, and direct payments integrated into automated business processes.
The pilot confirms technical and legal feasibility, but scaling the system will require broader participation from banks, infrastructure providers, and regulators. The SBA noted that this initiative is part of its strategic priority on digital currencies but does not mean that deposit tokens will be implemented immediately.
This project represents a significant step in the evolution of banking payments, making them faster, more efficient, and programmable, positioning Switzerland as a pioneering hub for integrating blockchain with traditional financial systems.
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