Mechanics and regulatory alignment
A group of major Swiss financial institutions, including UBS, PostFinance, and Sygnum, have successfully completed a cross-border payment using tokenized deposits on the Ethereum blockchain. This proof-of-concept, coordinated by the Swiss Bankers Association, demonstrates how traditional banking can integrate with public blockchain networks to improve transparency and automate processes through smart contracts. Regulatory compliance was a cornerstone of the initiative, with all smart contracts designed to align with existing financial laws. A FINMA-regulated bank participated as a counterparty, incorporating built-in compliance checks to ensure the operation remained within legal boundaries.
Security, Scalability and Market Impact
While the test confirmed that blockchain-based interbank payments are technically feasible, scalability remains a significant hurdle for widespread adoption. Ethereum’s current limitations were acknowledged, with proposals including layer-2 rollups and sharding suggested as potential solutions to enhance transaction capacity without compromising security. The participating institutions emphasized robust security protocols such as multi-signature approvals, cold storage, and regular penetration testing to mitigate risks, especially in an institutional context.
For corporate treasuries, tokenized deposits could lower operational costs and accelerate settlement times. For traders and investors, linking these digital bank deposits with public markets may unlock new opportunities in real-world asset (RWA) tokenization and improve secondary market liquidity. Regulators are also closely watching these developments, as they provide a practical framework for incorporating tokenized assets into existing legal systems.
This milestone reinforces the growing convergence between traditional finance and decentralized technology. However, achieving scale will require further technical upgrades and continued collaboration between banks, tech providers, and regulators.
