In mid-September 2025, Switzerland made a quietly revolutionary move. Three banks: UBS, Sygnum Bank, and PostFinance executed the first legally binding interbank payment using bank deposits tokenized on a public blockchain. This wasn’t a pilot inside one institution or a test of private ledger, it was a cross‐bank transaction settled publicly. As reported by the Swiss Bankers Association, this demonstrates a turning point for how financial institutions can leverage blockchain not merely for experimentation but for core payment infrastructure.
For organizations building in blockchain, DeFi, and finance tech (including Varmeta), this event raises key questions: How feasible is public blockchain infrastructure for interbank payments globally? What technological, regulatory, and interoperability challenges remain? And how might this reshape cross-border commerce and financial rails in coming years?
Switzerland’s milestone: The first legally binding interbank payment on a public blockchain
Tokenized deposits & binding payments
At the heart of the Swiss proof-of-concept are tokenized deposits, digital representations of bank deposits held by regulated banks, but usable on a public blockchain. In this case, the banks created deposit tokens for customers at different institutions, and executed payments between them over a shared public ledger. This payment was legally binding; that is, it carried enforceability under Swiss banking law.
The feasibility study also included an “escrow-like” scenario: swapping these deposit tokens for tokenized real-world assets (RWAs), where the settlement logic was executed via smart contracts. This adds not only proof of payment infrastructure, but also use-cases layered on top: financial asset transfer, ownership demarcation, automatic execution.
Efficiency & legal viability
The Swiss banks emphasized that such a system allows payment to be “processed immediately and definitively on a shared infrastructure,” as opposed to workflows with delays due to batch settlement, manual reconciliation, or dependencies on multiple correspondent banks.
They also noted alignment with Swiss legal frameworks, meaning issues like regulatory compliance, deposit protection, and bank oversight were factored in. The “deposit token” is not a cryptocurrency in the unregulated sense; it is a regulated digital token representing bank deposits.
Core technological foundations behind public-blockchain settlement
For interbank payments on public blockchains to work at scale, several technical ingredients must align:
- Public blockchain with sufficient throughput & finality
The ledger used must offer fast transaction finality (once confirmed, cannot be reversed), sufficient transactions per second (TPS), and network security. High latency or frequent reorgs (chain reorganizations) undermine trust. - Tokenization of deposits
A regulated bank must issue tokens that are 1-to-1 backed(or otherwise guaranteed) by real deposits. These tokens must behave like fiat in terms of stability, legal backing, ability to redeem/trust. - Smart contract logic for settlement & escrow
To automate certain transactions (escrow, conditional release, asset swaps), smart contracts must be secure, audited, and predictable. - Interoperability
Since banks run varied internal systems, sometimes using legacy rails, private ledgers, or different public blockchains, enabling interoperability connections between systems is vital. Bridges, cross-chain protocols, or standards are necessary. - Compliance, security & privacy
Handling bank deposits means adhering to AML/KYC, protection of customer data, cybersecurity standards, regulatory oversight. Transparency is essential, but privacy and confidentiality must also be preserved (e.g. only authorized parties see transaction details).
Key challenges and risks in scaling blockchain-based interbank payments
While Switzerland’s example is promising, scaling this globally brings serious challenges:
- Regulatory & legal uncertainty in other jurisdictions
What is legally binding in Switzerland may not be in many countries. Issues of contract enforceability, recognition of digital tokens, deposit insurance, and banking regulation differ. - Interoperability gaps
Many public blockchains are not optimized for bank-grade settlement. Some have slower finality; some incur high gas or transaction fees. Interoperability between different public chains (or between public + private/permissioned blockchains) is still immature. - Latency & performance
In high-volume banking operations (e.g. wholesale payments), speed is not just nice but mandatory. Systems need to handle high TPS, sub-second finality, and guarantee uptime. - Privacy & confidentiality
Public blockchains are transparent by design. While transparency aids audit and traceability, banks must ensure private data protection, limit exposure of sensitive details, and satisfy customer confidentiality requirements. Zero-knowledge proof techniques, privacy layers, or permissioning might help. - Operational & governance risks
How are nodes validated? Who controls upgrades? How do dispute or failure scenarios proceed (e.g. what happens if a smart contract misbehaves, if an oracle fails)? Governance needs to be robust.
Strategic implications for the global financial ecosystem
The Swiss initiative represents far more than a localized experiment; it signals a structural shift in global finance. By enabling interbank payments on a public blockchain, it challenges the dominance of legacy SWIFT-based correspondent banking networks. This opens the door to more democratized and cost-efficient cross-border payment rails, particularly in regions historically underserved by traditional finance.
Equally significant is the potential for truly 24/7 settlement. Conventional banking systems remain constrained by cut-off times, weekend closures, and delayed reconciliation. In contrast, blockchain infrastructure offers continuous, real-time transaction finality, enabling financial institutions to optimize liquidity management and reduce operational friction.
Beyond payments, the free movement of tokenized deposits, real-world assets, and other financial instruments across institutions creates the foundation for a new generation of composable financial products. Automated yield optimization, token-based collateralization, and programmable financial contracts could fundamentally transform how financial services are designed and delivered.
As these pilots gain traction, regulators and policymakers worldwide will face mounting pressure to develop consistent international standards. They will need to clarify the legal status of deposit tokens, address issues of liability and privacy, and define cross-border compliance frameworks, ultimately shaping the future architecture of digital finance.
Actionable insights for blockchain builders and solution providers
For Varmeta and other blockchain or Web3 solution providers, Switzerland’s pioneering example offers both inspiration and a practical roadmap for future development. A key lesson lies in legal enforceability. Any “tokenized” or “on-chain” payment system must rest on solid legal foundations, with clear governance and compliance mechanisms. A technical proof of concept might function flawlessly in isolation, but without legal recognition and regulatory alignment, it risks becoming irrelevant when scaled into real-world financial systems.
Another critical takeaway is the need for interoperability and modular architecture. Public blockchains on their own cannot address all the requirements of interbank payments. Builders must anticipate multi-chain environments and design systems capable of bridging networks, integrating cross-chain compatibility, and deploying fallback or Layer-2 solutions. Hybrid infrastructures combining permissioned and permissionless chains may prove necessary to balance openness with institutional control.
Equally important are security and auditability. Payment systems operating with bank deposits demand the highest standards of reliability. This includes rigorous smart contract audits, strong safeguards for custody and asset backing, and robust error-handling procedures. Recovery plans for potential oracle failures or contract vulnerabilities must be in place to maintain institutional trust.
Finally, success depends on user experience and collaboration. Banks, payment businesses, and regulators will only adopt such systems if the user interface hides complexity and delivers operational simplicity from wallet interactions and token redemption to dispute resolution. Equally, partnerships with financial institutions and public authorities are essential. These initiatives thrive when multiple stakeholders integrate their expertise, ensuring technological innovation aligns with market needs and regulatory frameworks.
Conclusion
Switzerland’s achievement of a binding interbank payment on a public blockchain marks a crucial inflection point. It demonstrates that the technology has matured far enough that real financial infrastructure bank deposits, cross-institution settlements can move onto public-blockchain rails with legal enforceability.
Still, many obstacles remain before this becomes commonplace: regulation, performance, interoperability, privacy, and governance. But as these early use cases proliferate, we’re likely to see a gradual shift: from proofs of concept to production systems, from siloed pilots to globally interoperable networks.
Those who build with rigor, foresight, and respect for both technology and legal frameworks will have the chance not just to participate, but to help shape the next generation of financial rails. The future of interbank payments is being written now and public blockchains have a central role to play.
Varmeta – Excellent in every block
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