Swiss banks UBS, PostFinance and Sygnum completed a proof of concept showing a legally binding bank payment via a public blockchain using tokenized deposit instructions and smart contracts to trigger off‑chain fiat settlement between institutions.
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First legally binding interbank payment via a public blockchain
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PoC used deposit tokens and smart contracts to trigger off‑chain settlement and escrow-style asset exchange.
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Study confirms feasibility but highlights scalability and coordination challenges with wider adoption.
Public blockchain bank payment feasibility confirmed by UBS, PostFinance and Sygnum — read the PoC findings and next steps for tokenized payments.
UBS, Sygnum Bank and PostFinance completed a blockchain study proving the technology’s efficacy for bank deposits and institutional payment infrastructure.
Some of Switzerland’s largest banks have completed a proof of concept (PoC) that tested blockchain technology and smart contracts for interbank payments, marking what they say is 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 Tuesday.
What is the PoC that proved a bank payment via a public blockchain?
The PoC tokenized payment instructions as deposit tokens on a public blockchain and used smart contracts to trigger off‑chain fiat settlement between participating banks. It executed customer payments between banks and an escrow-like exchange of deposit tokens for tokenized real‑world assets (RWAs).
How did the deposit token mechanism work?
The system recorded payment instructions on a public blockchain and used smart contracts for verifiable workflows. Banks executed the corresponding off‑chain fiat transfer once the on‑chain conditions were met, enabling legally binding settlement while keeping the fiat move off‑chain.
Why is this considered legally binding?
The Swiss Bankers Association reported that the combination of public blockchains with permissioned applications and compliant smart contracts produced verifiable processes and technical security that meet legal and regulatory requirements under Swiss frameworks.
What limitations and scalability challenges remain?
While the PoC confirmed feasibility, the SBA highlighted the need for additional design adjustments, broader cooperation with other banks, infrastructure providers and authorities, and improved throughput to reach production scale.
| Use case | Token type | Settlement | PoC outcome |
|---|---|---|---|
| Customer interbank payment | Deposit token | Off‑chain fiat after on‑chain trigger | Legally binding payment executed |
| Escrow exchange for RWAs | Deposit token ↔ Tokenized RWA | Automatic conditional settlement | Successful exchange workflow |
Project Pine system overview. Source: BIS
Christoph Puhr, digital assets lead at UBS Group, said the PoC demonstrates that interoperability of bank money via public blockchains “can become a reality,” enabling innovation around tokenized assets and the future of financial systems.
Similar research in central banking shows smart contracts can be a flexible toolkit in a tokenized financial system. A joint study by the Federal Reserve Bank of New York’s Innovation Center and the BIS Innovation Hub Swiss Centre found that smart contracts offer central banks rapid‑response tools for policy implementation in hypothetical scenarios.
Smart contract testing scenario. Source: BIS
How could banks scale public blockchain payments?
Scaling requires higher throughput, standardized token definitions, cross‑institution governance, and integration with existing settlement rails. Banks must coordinate on compliance, privacy-preserving designs, and operational resilience to move from PoC to production.
What are the next steps recommended by participants?
Participants recommend iterative design changes, broader pilot participation, and closer cooperation with infrastructure providers and authorities to address technical and regulatory gaps before wider rollout.
Frequently Asked Questions
Can a public blockchain securely trigger bank settlements?
Yes. The PoC showed smart contracts on a public blockchain can securely trigger legally binding off‑chain bank settlements when combined with appropriate permissioning, auditability and regulatory compliance.
Will this replace existing interbank payment systems?
Not immediately. The PoC indicates potential convergence between traditional rails and tokenized systems, but full replacement requires scale, standardization and regulatory clarity.
How long before institutional adoption expands?
Adoption timing depends on successful pilot extensions, interoperability standards and regulatory frameworks. The PoC accelerates interest but wider deployment may take multiple years and coordinated industry efforts.
Key Takeaways
- Feasibility proven: A legally binding interbank payment via a public blockchain was executed in a Swiss PoC.
- Technical design: Deposit tokens and smart contracts enabled on‑chain triggers with off‑chain fiat settlement.
- Next steps: Scalability, governance and broader cooperation are required before production implementation.
Conclusion
The Swiss PoC led by the SBA and participating banks confirms that a bank payment via a public blockchain is technically feasible and legally attainable. With targeted design improvements and wider industry cooperation, tokenized payments could accelerate integration between traditional finance and decentralized innovations. Watch for expanded pilots and standardization efforts as the next phase.
