April 1, 2023 1:46 am

The Swiss Bankers Association released a white paper on how Swiss banks can assistance the improvement of the country’s digital economy. A Swiss franc “joint” deposit token is the answer the group settled on. 

Stablecoins have restricted penetration in the Swiss economic program, even as finish-to-finish digitization is becoming far more widespread in enterprise models, and no Swiss stablecoins are accessible by the basic public, the paper says.

The authors of the paper recommend a wide variety of stablecoins — that is, a deposit token “issued by regulated and adequately supervised intermediaries” — issued and redeemed by sensible contracts and denominated in Swiss francs. The token could be made as a ledger-primarily based safety, rather than a set of directions, to give it with the greatest prospective.

The paper identifies 3 style selections for a deposit token: Standardized tokens that any industrial bank can situation with a uniform common, colored tokens that are issued by industrial banks to any requirements they pick, and joint tokens that are issued by a licensed and supervised specific objective automobile consisting of participating banks. The authors choose the final selection.

Comparison of digital types of cash. Supply: SBA

A joint deposit token would facilitate cash creation due to its flexibility, have low costs and could earn interest when held in bank accounts. It would be significantly less liable to runs than tokens issued by person banks. Additionally:

“From a technical standpoint, all the financial and legal needs that have been identified can be met. […] In principle, the DT need to operate on a public blockchain with extra protocols to make certain adequate privacy and transaction efficiency.”

The token would ideally be a layer-two answer usable in decentralized finance (DeFi) applications and capable of self-custody or bank custody.

Deposit tokens are a relative newcomer to the ranks of digital currencies. According to a current overview in The Washington Post, they originated in Project Guardian, an initiative the Monetary Authority of Singapore launched with various economic institutions in Could 2022 that sought to discover DeFi applications in wholesale funding markets.

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JPMorgan, a single of the participants in Project Guardian, executed the 1st DeFi trade on a public blockchain as aspect of that project. JPMorgan and project participant Oliver Wyman released a paper discussing the merits of deposit token technologies in February.

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