First instance of cross-bank transaction conducted on a public blockchain by Swiss banks
Swiss Banks Successfully Complete First Cross-Bank Payment Using Tokenized Deposits on Public Blockchain
In a significant step forward for the blockchain industry, three Swiss banks - UBS, PostFinance, and Sygnum Bank - have successfully completed the first binding cross-bank payment using tokenized deposits on a public blockchain. This development marks a validation of Ethereum's capabilities for institutional financial applications.
The cross-bank payment was part of a Deposit Token feasibility study under the Swiss Bankers Association. The banks involved in the trial were part of the Commercial Bank Money Token (CBMT) initiative, which includes UDPN, Giesecke+Devrient (G+D), and GFT. The exact timing of the trial is not specified in the provided information.
The study involved clients sending tokens representing bank deposits across the blockchain to settle transactions. The use of smart contracts could enable automated compliance and reporting functions in the cross-bank payment system. The payment utilized blockchain infrastructure to settle transactions between different financial institutions, marking a departure from traditional correspondent banking networks.
Unlike private blockchain networks traditionally favored by banks, the use of Ethereum's public infrastructure suggests growing confidence in decentralized systems for critical financial operations. Switzerland's progressive regulatory approach to digital assets has enabled banks to explore blockchain applications more freely than institutions in many other jurisdictions.
Thomas Frei, head of product innovation at Sygnum Bank, stated that this is something new as tokenized deposits can be used across different banks, which was not possible before. He explained that the tokenized deposits represent actual bank deposits that have been made usable on blockchain infrastructure.
However, Frei cautioned that additional work remains before the tokenized deposit system could be commercially deployed, including addressing regulatory requirements, scalability considerations, and operational integration challenges. The cross-bank payment system can be considered an alternative to stablecoins.
Major banks have invested heavily in distributed ledger technology, though most previous efforts focused on private or consortium networks rather than public blockchains. The successful test arrives as traditional financial institutions globally explore blockchain applications for payments and settlement. Future implementations of the tokenized deposit system could enable immediate, definitive payments on shared infrastructure while integrating directly into automated business processes.
This development represents a significant milestone in the adoption of blockchain technology by traditional financial institutions and underscores the potential benefits of public blockchain networks for cross-bank payments and settlements.
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