UBS, Sygnum, PostFinance MoU for Testing Deposit Tokens

• UBS, Sygnum, and PostFinance have joined forces through a memorandum of understanding (MoU) to explore the viability of deposit tokens.
• This initiative is a continuation of the concept previously introduced by the Swiss Bankers Association (SBA).

The prominent banking institution UBS has recently established a memorandum of understanding (MoU) with Sygnum and PostFinance. This agreement focuses on testing and assessing the potential advantages of a deposit token linked to the Swiss franc.

MoU Between UBS, Sygnum, and PostFinance

The MoU among UBS, Sygnum, and PostFinance also incorporates the Swiss Bankers Association (SBA). This organization will serve as a platform to monitor the pilot’s progress and convey the outcomes or decisions made during the testing phase to non-participating entities.

The involved institutions aim to evaluate the feasibility of the deposit token’s primary use cases, initially proposed in a SBA white paper. The document outlines how a deposit token issued by conventional banks can significantly enhance their competitiveness, innovation, and sovereignty.

The white paper states that deposit tokens leverage the tokenization capabilities offered by public blockchain technology. This asset functions as “programmable money,” specifically representing the digital form of the Swiss franc.

These deposit tokens come with programmable features and are available around the clock. They are designed for the trading and settlement of digital assets and are positioned as a more efficient and low-cost payment solution, particularly relevant in the emerging “Economy 4.0,” which encompasses applications like machine-to-machine (M2M) payments facilitated by the Internet of Things (IoT). Additionally, the SBA sees a variety of applications for these financial tools within decentralized finance (DeFi).

However, the MoU between UBS, Sygnum, and PostFinance focuses solely on two key use cases of the deposit tokens: evaluating peer-to-peer payments and digital assets settlement.

Advancement Towards Swiss Franc Tokenization

The Swiss National Bank (SNB) has been steadfast in its efforts to pilot a wholesale central bank digital currency (wCBDC). In its recent statements, the central bank of Switzerland has acclaimed this project as “very successful.”

Nonetheless, the financial institution has opted to extend the pilot for an additional two years while addressing various challenges encountered in the current version of the program. These challenges include reliance on a third-party platform within a public-private partnership framework and the possibility of fragmenting the Swiss franc.

Meanwhile, SBA Chief Economist Dr. Martin Hess has urged relevant stakeholders to expedite the rollout of a tokenized Swiss franc. He emphasized the need for the financial sector to act swiftly to safeguard Switzerland’s currency’s competitive and strategic standing in the evolving digital economy.