• Temporarily Unavailable

Swiss Bankers Association Proposes Joint Deposit Tokens to Boost Switzerland’s Digital Economy

David - Cryptocurrency Specialist    

The Swiss Bankers Association has recently published a white paper outlining a potential solution to boost Switzerland's digital economy using a Swiss franc "joint" deposit token. While stablecoins have had limited impact on the Swiss financial system, the proposed deposit token would be a "ledger-based security" that can be issued and redeemed by smart contracts and denominated in Swiss francs. With the potential to be utilized as a layer-2 solution in decentralized finance (DeFi) applications, the joint deposit token could be held in self-custody or bank custody. We will explore the implications of joint deposit tokens and their possible impact on the digital economy.

What are Deposit Tokens and How Do They Work

Deposit tokens, also known as digital tokens, are a new type of digital currency that originated in Singapore's Project Guardian last year. They are "issued by regulated and adequately supervised intermediaries," and can be issued and redeemed by smart contracts. Deposit tokens are denominated in a fiat currency, such as the Swiss franc, and are designed to be stable, meaning their value is pegged to that of the underlying asset.

The Proposed Solution: Swiss Franc Joint Deposit Tokens

The Swiss Bankers Association's white paper proposes a Swiss franc "joint" deposit token, issued by a licensed and supervised special purpose vehicle consisting of participating banks. The authors of the paper believe that this type of token would be less liable to runs than tokens issued by individual banks. A joint deposit token would also facilitate money creation due to its flexibility and could earn interest when held in bank accounts.

Design Options for Deposit Tokens

Within the white paper, the Swiss Bankers Association highlights three potential design options for deposit tokens: standardized tokens, coloured tokens, and joint tokens. Standardized tokens are issued with a uniform standard and can be issued by any commercial bank. Coloured tokens, on the other hand, are issued by commercial banks to any standard they choose. Joint tokens are a collaborative effort, issued by a licensed and supervised special purpose vehicle consisting of participating banks. The authors of the paper have expressed a preference for joint tokens due to their collaborative nature and potential to minimize the risk of runs on tokens issued by individual banks.

The Future of Deposit Tokens in the Digital Economy

Deposit tokens could have a significant impact on the digital economy. They could enable seamless cross-border payments and increase financial inclusion for the unbanked. Furthermore, they could be used in decentralized finance (DeFi) applications and provide a more stable store of value than traditional cryptocurrencies. As the world becomes increasingly digital, deposit tokens could become an important part of the financial system.

The Swiss Bankers Association's proposal for a Swiss franc joint deposit token could be a game-changer for Switzerland's digital economy. Deposit tokens have the potential to facilitate seamless cross-border payments and increase financial inclusion. Furthermore, they could provide a more stable store of value than traditional cryptocurrencies and be used in decentralized finance (DeFi) applications. As the world becomes increasingly digital, deposit tokens could become an important part of the financial system. To learn more about the investment space and crypto asset management, visit BC Bitcoin, a cryptocurrency broker, where you can buy and sell cryptocurrency and learn more about crypto assets and their features.

We use cookies to better provide our services. By using our services, you agree toour use of cookies.