Swiss Banks Pioneer Legally Binding Blockchain Payment on Public Network
Switzerland’s major banking institutions have successfully completed a groundbreaking proof-of-concept (PoC) that utilized blockchain technology and smart contracts for interbank payments. This initiative, spearheaded by UBS, PostFinance, and Sygnum Bank under the Swiss Bankers Association (SBA), represents the first legally binding bank payment executed via a public blockchain.
Tokenized Deposits and Escrow-Like Transactions
The PoC explored the use of blockchain-based deposit tokens to facilitate payment instructions triggering offchain fiat transfers. One use case demonstrated direct payments between customers of the participating banks, while another tested an escrow-like mechanism exchanging deposit tokens for tokenized real-world assets (RWAs), with transactions automatically processed through smart contracts.
The SBA emphasized that the smart contracts underpinning the system ensure verifiable processes, technical security, and adherence to regulatory compliance. This validates that public blockchains, when combined with permissioned applications, can support legally binding payment instructions across institutions.
Scalability and Collaboration Challenges
Despite confirming the feasibility of institutional payments using blockchain, the SBA acknowledged that scalability challenges persist. Addressing these will require further design refinement and enhanced collaboration among banks, infrastructure providers, and regulatory authorities.
Interoperability as a Catalyst for Financial Innovation
Christoph Puhr, UBS Group’s digital assets lead, highlighted the study’s significance, stating that interoperability between traditional bank money and public blockchains is becoming tangible. He noted, “The PoC demonstrates that interoperability of bank money via public blockchains can become a reality, enabling innovation around tokenized assets.”
Puhr added that such developments accelerate the evolution of tokenized financial instruments and allow stakeholders to influence the future architecture of financial systems on both national and global scales.
Global Context: Central Banks and Blockchain
This Swiss initiative parallels ongoing experiments by central banks worldwide. Notably, a May joint study by the US Federal Reserve Bank of New York’s Innovation Center and the Bank for International Settlements (BIS) Innovation Hub Swiss Centre found that smart contracts offer central banks flexible and rapid-response capabilities within tokenized financial ecosystems.
The BIS report underscored the adaptability of smart contract toolkits, allowing central banks to deploy and modify tools swiftly in hypothetical scenarios. However, it also recognized that current central bank infrastructures face limitations in supporting advanced blockchain use cases.
Conclusion
The successful completion of this PoC by Swiss banks marks a significant step toward integrating traditional banking systems with decentralized finance technologies. While technical and regulatory challenges remain, the initiative signals growing institutional confidence in blockchain’s potential to reshape payment infrastructures.
FinOracleAI — Market View
The successful proof-of-concept demonstrates tangible progress in bridging traditional banking deposits with public blockchain technology, reinforcing growing institutional interest in tokenized assets and decentralized finance. However, scalability and cooperation hurdles present risks that could delay widespread adoption. Market participants should monitor further developments in regulatory alignment and multi-bank collaboration to assess the pace of integration.
Impact: positive
