Swiss Bankers Association publishes white paper detailing merits of deposit tokens

Share IT

Key Takeaways

  • SBA Favors a joint deposit token which it claims will provide ‘freedom with regards to money creation.’
  • The paper details three design options for a deposit token: Standardized tokens, colored tokens, and joint tokens.

The Swiss Bankers Association has now released a white paper on a digital Swiss franc outlining various designs of deposit tokens on the blockchain.

Deposit tokens are tokens issued on a blockchain by a depository institution to represent a deposit claim. And are protected by the same regulatory safeguards that support commercial bank deposits.

From an issuing bank’s viewpoint, deposit tokens are only a redistribution of deposit liabilities on the bank’s balance sheet, with no modifications in the bank’s composition of assets.

The SBA white paper talks about a deposit token issued by regulated and adequately supervised intermediaries, redeemed by smart contracts and further denominated in Swiss francs. The paper adds that the token could be designed as a ledger-based security instead of a set of instructions to boost its potential.

The white paper by SBA further details three design options for a deposit token: standardized tokens that any commercial bank can issue with a uniform standard, joint tokens-issued by a licensed and supervised special purpose vehicle comprising of participating banks, and colored tokens- where each bank issues tokens with its own rules. The SBA, in its paper favors a joint token which it claims will provide ‘freedom with regards to money creation’.

Detailing the advantages of a joint deposit toke, SBA states that this kind of token could earn interest if held in a wallet with a bank, similar to a conventional deposit.

“From a technical standpoint, all the economic and legal requirements that have been identified can be met. In principle, the deposit token should operate on a public blockchain with additional protocols to ensure sufficient privacy and transaction efficiency’, the paper reads.

The debate around whether bank-issued deposit tokens could provide more stability than stablecoins has been going on for a while. Earlier this year, JPMorgan stated that Bank-issued deposit tokens are much safer than stablecoins for major institutions looking to transfer value across chains. A 2023 report has also noted that the rise of decentralized finance protocols may also result in the creation of liquidity pools for deposit tokens.

Share IT
Saniya Raahath
Saniya Raahath

Get Daily Updates

Crypto News, NFTs and Market Updates

Can’t find what you’re looking for? Type below and hit enter!