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Swiss Banks Make Plans to Utilize “Joint” Tokens for their DeFi Endeavors

The Swiss Banks have recently announced their plan for joining the rapidly expanding digital economy, by bringing in “joint” deposit tokens within their financial system. 


The Official Document of the Swiss Bankers Association

The Swiss Bankers Association, a professional body of Swiss financial institutions, has released a white paper outlining their plans to back the digital economy. The paper stated that the move is intended to support the Swiss Government’s objectives for supporting the digital economy.

The document also states that the Swiss group has decided on a “joint” deposit token to meet its objectives. Furthermore, it highlights the well-established presence of a stablecoin in the financial sector of the Swiss departments and notes that their use is limited. Despite the rise of end-to-end digitization in business models, stablecoins remain limitedly involved in Switzerland’s financial system. Moreover, no publically available Swiss stablecoins exist to date.

The document also emphasizes on the potential of using a deposit token denominated in Swiss Francs, which is issued and redeemed by smart contracts and regulated by adequately supervised intermediaries. This token has the potential to be structured as a ledger-based security, instead of a set of instructions, in order to maximize its stability. 

All About the Deposit Tokens

The authors of the paper have proposed three design options for deposit tokens: standardized tokens, colored tokens, and joint tokens.  Out of these, the joint token is considered to be the most effective, due to its flexibility, low fees, and the potential to earn interest when held in bank accounts. Additionally, this token is less vulnerable to failure compared to the tokens which are released by any individual banks. 

A deposit token can basically be described as a newly developed layer-2 solution that is suitable for various decentralized finance (DeFi) applications. It is capable of both self-custody and bank custody. Many sources suggest that this token first emerged with Project Guardian. In May of last year, the Monetary Authority of Singapore spearheaded this initiative with various reputable financial institutions.