(Reuters) – Three Swiss banks, including UBS, made a binding payment using bank deposits and a public blockchain for the first time, the Swiss Bankers Association announced on Tuesday.
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Payment was made as part of a feasibility study on the use of post-finance deposit tokens, Sygnim Bank and UBS.
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“It’s something really new,” said Thomas Frei, product innovation manager at Sygnum Bank.
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The deposit tokens refer to the bank deposits that have been made usable on the blockchain by “tokenizing”. During the study, customers sent tokens on the blockchain who represented bank deposits, by adjusting their respective transactions.
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“Our tokenized deposits can be used in different banks, which was not yet there,” said Frei.
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He said the study has shown that banks could cover their counterpart risk. Frei added that if JPMorgan also had tokenized deposits, they could only be used in JPMorgan.
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“Basically, what we have done is that we have launched a kind of new form of payment on the blockchain, which is an alternative to stablecoins,” Frei said. Stablecoins are cryptocurrencies whose value is fixed to that of another currency, product or financial instrument.
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In the future, payments could not only be treated immediately and definitively on shared infrastructure, but also be integrated directly into automated business processes, SBA said.
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More work must still be done before banks are ready to deploy the product, said Frei.
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(Report by Marleen Kaesebier. Edition by Dave Graham and Mark Potter)
