The Swiss Banking Association (SBA) recently published a white paper (1) in which they advocated the issuing of a joint deposit coin on a public blockchain. This token would be used to record deposits made by users.
The SBA made a note of the widespread agreement that stablecoins should be issued by recognized organizations and mentioned efforts by the FSB, OECD, and BCBS to regulate stablecoins. This will make supervision possible as well as maximize the protection of investors.
Once again, it emphasized the broad acceptance of digital currencies, especially stablecoins, the disruption in the crypto market, and the requirement for more dependable and trustworthy assets.
As a consequence of this, the SBA recommends three distinct courses of action as potential solutions to the problem. In one scenario, each bank has the ability to issue its own tokens according to its own set of rules.
In the event that this is not possible, they suggest that banks independently issue their coins but that these tokens adhere to conventional regulations and are fully backed by cash reserves.
The third strategy, known as the shared deposit token approach, is the one that the SBA recommends.
Alternative Varieties of Stablecoins
As per the whitepaper, a joint depositing token is a form of programmable money that operates on the public blockchain network and makes use of the capabilities of smart contracts.
A token like this one would make it possible for new use cases to be implemented, thereby lowering risks, increasing transactional efficiency, and opening up new business horizons.
It is believed that this will help to maintain the value of the Swiss franc and strengthen Switzerland’s status as a leading center for innovation.
As things stand, the SIX Digital Exchange & Sygnum have each launched their own stablecoins denominated in Swiss francs (CHF), so the option is already available. But, neither of these assets may be utilized outside of their own closed environments.
The Small Business Administration (SBA) is of the opinion that a common deposit token will both enable interoperability and provide increased security. In a similar vein, the token, if kept in a bank wallet, has the potential to yield interest similar to that of a traditional bank deposit.
Compliance of the Shared Deposit Token with the Law
In spite of the fact that the SBA’s position is very clear, there are still plenty of questions to resolve on the legal front. In light of the SEC’s proposal to consider the token as ledger-based security, authorities may wish to regulate it as a security.
Regrettably, doing so might render its potential contributions to economic and technical development null and void. As a consequence of this, either FINMA or the legislature have to elaborate on their stance regarding the proposed asset.
The same is true for the SBA, which must contend with the obstacle that the FINMA places in the way of regulated institutions that wish to produce stablecoins. The organization feels that some of the rules are too restrictive and is hoping that they can come to an alternative solution.