Better than a stablecoin, Swiss bankers invent the deposit token

One token to rule them all – On the bottom of general tokenization of the economy, several trends are currently observable. First of all, there are the projects around a central bank digital currency (MNBC) that develop all over the world. There are also different forms of stablecoins backed by various assets such as precious metals, natural resources or banking assets. And the youngest in the family is this concept of deposit token imagined within the Project Guardian in Singapore. What does it consist on ? And why the Swiss bankers already love it? Response to follow.


An idea that comes from Singapore, in collaboration with JP Morgan and Olivier Wyman

The idea of ​​this new type of token was born last year within a project led by the monetary authority of Singapore (AMS). THE Project Guardian, that’s its name, is a collaborative initiative with the financial sector. It aims to develop apps concrete ways of tokenizing financial assets and DeFi within a legal framework. We find in particular JP Morgan Chase & Cothe American giant, but also Olivier Wymanwhich is an American strategic consulting firm.

I’idea is relatively simple since it consists of transform a deposit of money in a bank in one digital asset. Then to program different characteristics using a smart contract on a blockchain. For its defenders, the deposit token is the perfect compromise enters on one side a stablecoin issued by a private company. With the potential problems that go with it. And on the other hand, a MNBC guaranteed by the supreme monetary authority of a country. With the risks inherent in this form…

Swiss bankers want to pool their financial power to issue new kind of tokens called deposit tokens and backed by bank deposits.
Swiss bankers announce the publication of the white paper of their project – source: Twitter

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The Swiss Bankers Association really like the idea

The Swiss Bankers Association has therefore just published a White Book which takes up the idea stated above. But with sauce Swiss. The main lines are taken up with this new form of stablecoins which would therefore be backed by deposits in Swiss banks. And it will not surprise anyone that these deposits represent colossal sums and that they are therefore at the heart of the new potential system:

“Deposits already play a central role in the implementation of central bank monetary policy. If this is to remain the case in a tokenized financial system, a digital Swiss franc should resemble conventional deposits as closely as possible, at least from an economic point of view. »

White paper of the Swiss Bankers Association published in March 2023

THE apps for this new type of token are very wide and very varied. Experts first imagine that it could serve as a means of payment. Especially when acquiring important assets such as cars or real estate through a transfer of ownership programmed. But they also plan to put them into practice when buying bonds, stocks or financial products for automate the payment of dividends, coupons or interest.

Swiss bankers are considering different scenarios around these deposit tokens and the one that stands out is the creation of an SPV to pilot and control the issuance of these new kind of digital assets.
Comparison of the advantages/disadvantages of the different tokens considered – source: Swiss Bankers Association

Several technical possibilities but only one satisfactory

In order to set up such a project, the bankers imagined different possibilities (comparative table above). Initially, it was envisaged that each bank could make its own deposit token in his corner. But for legal, but also economic reasons, this is a priori excluded.

Suddenly, the idea that is unanimous is the following. It is about creating a special purpose vehicle (SPV) – i.e. a simplified company form – owned jointly by all participating banks. This would allow mutualise the underlying assets and to give more solidity and readability to the project.

These deposit tokens are currently in the planning stage. But the underlying idea is making its way into the global economy. The world’s major banks are already thinking about the next world and seriously considering what is now called the tokenization financial assets. And the deposits are therefore today also affected by this financial revolution. And Switzerland is far from being the only country to experiment!

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