The Swiss Bankers Association has proposed the use of Swiss franc “joint” deposit tokens as a means of supporting the development of the country’s digital economy.

Despite the increasing digitization of business models, stablecoins have limited penetration in the Swiss financial system, and no Swiss stablecoins are accessible by the general public, the association said in a white paper.

The paper suggests a variety of stablecoins, issued and redeemed by smart contracts and denominated in Swiss francs, that could be designed as a ledger-based security to provide them with the greatest potential.

The authors identified three design options for a deposit token: standardized tokens, colored tokens, and joint tokens, with the latter option being the preferred choice.

A joint deposit token would facilitate money creation due to its flexibility, have low fees, and could earn interest when held in bank accounts. Furthermore, it would be less liable to runs than tokens issued by individual banks. The token would ideally be a layer-2 solution usable in decentralized finance (DeFi) applications and capable of self-custody or bank custody.

Deposit tokens are a newcomer to the ranks of digital currencies, originating from Project Guardian, an initiative launched by the Monetary Authority of Singapore in May 2022. The Swiss Bankers Association’s proposal reflects the growing interest in stablecoins and their potential applications in the digital economy.