Swiss Bankers Association Proposes Joint Deposit Token

Despite the clarity of the SBA’s stance, there are still many questions to answer on the legal front.

In a recently published white paper, the Swiss Bankers Association (SBA) proposed the issuance of a joint deposit token on a public blockchain.

The SBA noted a consensus that stablecoins be issued by registered institutions and cited a push to regulate stablecoins by the FSB, OECD, and BCBS. This will enable supervision and optimal investor protection. Again, it stated the widespread adoption of digital currencies, including stablecoins, the breakdown in the crypto market, and the need for more trusted and reliable assets.

Consequently, the SBA suggests three possible approaches to handling the situation. In one instance, individual banks can issue their tokens with their rules. Otherwise, they propose that banks separately launch their tokens but follow a standardized regulation and are fully backed by cash reserves. The third approach, which the SBA favors, is the joint deposit token approach.

Different Kind of Stablecoin

According to the whitepaper, a joint deposit token is a programmable money based on the public blockchain network and smart contract features. Such a token would allow new use cases, reduce risks, increase transactional efficiency, and open new business frontiers. This, it believes, will support the Swiss franc and bolster Switzerland’s position as a top innovation hub.

As it stands, there are already two CHF-denominated stablecoins issued by the SIX Digital Exchange and Sygnum. However, both assets are only usable in their private ecosystems. The SBA believes a joint deposit token will allow interoperability and guarantee more security. Likewise, the token could earn interest like a conventional bank deposit if held in a bank wallet.

Legality of the Joint Deposit Token

Despite the clarity of the SBA’s stance, there are still many questions to answer on the legal front. With the SBA proposing the token as ledger-based security, regulators may want to treat it as a security. Unfortunately, doing so could nullify its economic and technological potential. Consequently, there is a need to clarify the FINMA or the legislature’s position on the proposed asset.

Likewise, the SBA has to deal with the hurdle imposed by the FINMA on regulated institutions looking to issue stablecoins. The body considers some of the requirements as restrictive and hopes they can agree on a workaround.

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