Quick Takeaways
- Swiss banks UBS, Sygnum, and PostFinance used blockchain to complete the first-ever legally binding interbank payment on a public network.
- Tokenizing deposits and automating asset exchanges and payments with smart contracts were part of the test.
- Although encouraging, the system still requires design, automation, and teamwork enhancements before it can be broadly implemented.
Blockchain at the Core: What the Banks Tested
In a major step forward for banking and blockchain technology, three of Switzerland’s leading banks, UBS, Sygnum, and PostFinance, ran a successful test proving that blockchain can handle legally binding payments between banks.
Instead of transferring money the traditional way, the banks used deposit tokens, digital representations of fiat money recorded on a public blockchain.
When the token moved, it triggered a real-world payment between bank accounts off-chain.
They ran two key experiments:
- First, they completed a customer-to-customer payment across different banks using the blockchain-triggered token.
- Second, they tested a more complex setup that worked like an escrow, where deposit tokens were exchanged for tokenized real-world assets, and the process was handled entirely by smart contracts.
So, the blockchain wasn’t just for show; it actively controlled the flow of funds and assets.
Blockchain in Action: Why This Matters
This wasn’t just a tech demo. The results of this proof-of-concept carry serious implications. According to the Swiss Bankers Association (SBA), this is the first time such a transaction has been legally recognized using a public blockchain. That’s a big deal.
Why? Because it shows that blockchain isn’t just a playground for crypto startups, it’s being used by regulated banks under a national legal framework. Plus, the fact that these payments were legally binding means they hold up in court, just like traditional banking transfers.
Christoph Puhr, digital assets lead at UBS, summed it up well: “This shows that interoperability between traditional bank money and public blockchains is becoming a reality.”
That reality is getting closer thanks to smart contracts, which ensured compliance, verified each step, and removed the need for manual intervention.
Blockchain Isn’t Perfect Yet, But It’s Getting There
Of course, no system is flawless on day one, and this one is no exception.
The SBA pointed out that while the test proved blockchain-based payments can work, there are still a few hurdles:
- Much of the actual money still moves off-chain, which means we’re not fully decentralized yet.
- The current design needs improvements to handle large-scale transactions efficiently.
- Cooperation between more banks, regulators, and tech providers is essential to move from pilot to production.
Even so, this is a major leap forward. With future improvements, blockchain technology could be leveraged to power payments and asset trading, backed by smart contracts for speed, transparency, and security.
