GENEVA, Switzerland–Several of Switzerland’s largest banks said they have completed a proof-of-concept (PoC) that tested blockchain technology and smart contracts for interbank payments, marking what they said was the first legally binding bank payment via a public blockchain.
Under the umbrella of the Swiss Bankers Association (SBA), UBS, PostFinance and Sygnum Bank conducted a feasibility study on blockchain-based deposit tokens and payments infrastructure, the SBA announced, according to CoinTelegraph.
“The test initiated an offchain fiat money transfer triggered by payment instructions tokenized on the blockchain as a ‘deposit token,’” the publication reported. “The first use case executed a payment between bank customers of the participating banks, while the second tested an escrow-like process that exchanged deposit tokens for tokenized real-world assets (RWAs) with automatically processed transactions.”Scalability Challenges Remain
According to the SBA, the system’s underlying smart contracts enable “verifiable processes, technical security, and compliance with regulatory requirements.” The SBA added that public blockchains with permissioned applications can trigger “legally binding” payments.
“While the results confirm the feasibility of institutional payment using blockchain technology, scalability requires ‘additional design adjustments and increased cooperation with other banks, infrastructure providers, and authorities,’” CoinTelegraph reported, quoting the SBA.
The report added that the successful study may signal more interest toward blockchain-based payment rails from large financial institutions, accelerating
