• 16 October, 2024
News

Swiss Banks Collaborate to Test Blockchain-Based Swiss Franc

Swiss Banks Collaborate to Test Blockchain-Based Swiss Franc

PostFinance, UBS, and Sygnum, are looking into a blockchain-based digital Swiss franc under Swiss Bankers Association. The project, dubbed “Digital Currencies” aims to revolutionize the financial sector of Switzerland. The banks will test a digital Swiss franc deposit token using a distributed ledger technology (DLT) and smart contracts.

Creating a Digital Payment System 

The project centers on creating a deposit token based on a blockchain. This token serves like conventional bank deposits do. The Proof of Concept (PoC) will assess two primary uses. These are direct payments between banks and delivery against payment transactions with escrow. The deposit token combines the reliability of banking with the innovation of blockchain. Using DLT, the banks aim to enhance transaction speed, security, and cost-effectiveness.

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A memorandum of understanding (MoU) guides the alliance. It describes how the banks create, run, and evaluate the PoC. Together PostFinance, UBS, and Sygnum will address legal, technical, and operational challenges. This cooperation seeks to assess the possibility for a more extensive digital franc deployment. The project considers factors like economic impact, regulatory needs, and operational risks. Per recents reports, completion of the PoC is expected by 2025.

Transforming Banking 

The pilot signals a shift in Swiss banking towards digital transformation. The banks want to change conventional operations to a new framework by digitizing consumer deposits. By introducing blockchain into basic banking services, this initiative transcends mere cryptocurrency offerings. Should it be effective, it could affect sector access and openness. Still, there are difficulties especially in managing cross-border transactions and regulatory compliance.

The digital Swiss franc initiative could significantly impact Switzerland’s financial ecosystem. The project seeks to enhance transaction efficiency and reduce costs for both banks and their customers. The shift toward digital currencies fits world patterns and helps Switzerland establish leadership in financial creativity.

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