The Swiss Bankers Association published a white paper on how Swiss banks can support the development of the country’s digital economy. A “joint” deposit token in Swiss francs is the solution the group agreed on.
THE stablecoins have limited penetration into the Swiss financial system, even though end-to-end digitization is becoming more common in business models, and no stablecoin Switzerland is only accessible to the general public, according to the document.
The authors of the white paper suggest a variety of stablecoins, i.e. a deposit token ” issued by appropriately regulated and supervised intermediaries – issued and redeemed by smart contracts and denominated in Swiss francs. The token could be designed as a registry-based securityrather than a set of instructions, to give it the greatest potential.
The document identifies three options design for a deposit token: standardized tokens that any commercial bank can issue to a uniform standard, colored chips issued by commercial banks to standards of their choice, and joint tokens issued by an authorized and supervised special purpose vehicle made up of participating banks. The authors prefer the latter choice.
A joint deposit token would make it easier to create money due to its flexibility, have low fees, and could earn interest when held in bank accounts. It would be less exposed to mass withdrawals than tokens issued by individual banks. Moreover :
From a technical point of view, all identified economic and legal requirements can be met. […] In principle, the deposit token should work on a blockchain public with additional protocols to ensure sufficient privacy and transactional efficiency.
The token would ideally be a solution of layer 2 usable in the applications of decentralized finance (DeFi) and capable of self-custody or bank custody.
The deposit token: an innovation promoted by JPMorgan
Deposit tokens are relatively newcomers to the realm of digital currencies. According to a recent overview of washington postthey come from Project Guardianan initiative launched by the Monetary Authority of Singapore with several financial institutions in May 2022 aimed at exploring DeFi applications in wholesale funding markets.
JPMorganone of the participants in the Project Guardianmade the first DeFi transaction on a blockchain public as part of this project. JPMorgan and the project participant Oliver Wyman published a paper in February, discussing the merits of deposit token technology.
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