Swiss Banks Break Legal Ground with Blockchain Payments Revolution

A coalition of leading Swiss financial institutions has completed a pilot project that successfully tested the feasibility of using blockchain technology and smart contracts for interbank payments. The Swiss Bankers Association (SBA), a key industry body, facilitated a proof-of-concept involving UBS, PostFinance, and Sygnum Bank, marking what is being described as the first legally binding interbank transaction executed on a public blockchain. This pilot, announced on September 16, 2025, leveraged Ethereum to carry out a series of transactions, including standard payments and a complex escrow-style exchange.

The initiative involved the creation of tokenized representations of fiat bank deposits—referred to as "deposit tokens"—which were used to trigger off-chain payments managed by smart contracts. In the more complex escrow-style scenario, the banks successfully exchanged deposit tokens for tokenized real-world assets (RWAs) entirely through smart contracts. This represents a significant milestone in the application of blockchain for financial transactions, as it was the first time these banks executed a legally binding interbank payment without relying on traditional infrastructure.

Smart contracts played a central role in the pilot, enabling automated execution, enhanced transparency, and reduced counterparty risk. However, the banks emphasized the use of a permissioned framework to ensure legal enforceability and compliance with regulatory standards. While Switzerland currently operates a robust domestic payments network such as the Swiss Interbank Clearing (SIC) system, these traditional setups are not designed to accommodate programmable conditions or seamless integration with blockchain-based systems. The pilot results have confirmed that blockchain technology can be used to upgrade payments infrastructure, but participants noted that scaling this solution would require collaboration with a broader range of stakeholders, including other banks, infrastructure providers, and regulatory bodies.

The project’s success has generated optimism about the potential for blockchain to revolutionize payment systems. According to Christoph Puhr, UBS Group’s digital assets lead, the findings suggest that the interoperability of bank money via public blockchains can become a reality. This could lead to greater innovation in tokenized assets and programmable finance. Martin Hess, Head of the SBA’s Digital Currencies Project, noted that the deposit token concept is a strategic step toward the future of the payment system and reflects the Swiss financial center’s capacity for innovation. Alexander Thoma from PostFinance added that the feasibility study demonstrated the potential of blockchain to enhance the efficiency and security of payment transactions.

Despite the encouraging results, the pilot identified several challenges that need to be addressed for broader implementation. These include scalability issues such as throughput capacity, on-chain privacy, and integration with existing banking systems. The next phase of the initiative will involve refining the model and engaging more financial institutions and regulatory bodies to ensure legal clarity and interoperability. The initiative is part of a broader trend of blockchain adoption in finance, with other recent developments including the London Stock Exchange Group’s first blockchain-powered fundraising and the Boerse Stuttgart Group’s launch of a blockchain-powered settlement platform in Germany.