Swiss Banks Complete Blockchain Technology Testing for Interbank Payments

Under the Swiss Bankers Association (SBA), multiple banks have completed the Proof-of-Concept (PoC) for testing blockchain technology and smart contracts to conduct interbank payments. It was reported as the first-ever legally binding blockchain payment completed through a public blockchain. Three of the largest Swiss Banks, including UBS, Sygnum Bank and PostFinance, took part in this exercise, which is now recorded as a major milestone in institutional adoption of cryptocurrency. The ultimate aim of this practice was to evaluate the technology’s efficacy for bank deposits and institutional payment infrastructure.

Details of the Testing by Swiss Banks

The test started with an offchain fiat money transfer triggered by tokenized payment instructions on a blockchain, labelled as a deposit token. During the first executed payment, the transaction was performed between customers of the participating banks. The second test evaluated an escrow-like process backed by automatically processed transactions, where deposit tokens were exchanged for tokenized real-world assets (RWAs).

This is officially announced as the first time the largest Swiss banks have carried out a legally binding payment across institutions using a public blockchain and bank deposits.

Official Statement

The system’s underlying smart contracts enable “verifiable processes, technical security, and compliance with regulatory requirements,” said the SBA, adding 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,” the SBA added.

SBA, founded in Basel in 1912, serves as an umbrella organization of the Swiss Banks, comprising about 265 institutions and 12,000 individuals. The successful testing of blockchain technology and smart contracts facilitated by the SBA could signal increased interest from large financial institutions toward blockchain-based payments. The initiative aims to accelerate the convergence of traditional and decentralized finance for enhanced security, smoother transactions, and increased automation.