In 2021, Switzerland became one of the first countries to adopt a comprehensive legal framework for the application of DLT. Besides various adjustments to securities law, a new licence category for DLT trading facilities has been created under the Financial Market Infrastructure Act. This has created the basis in Switzerland for a regulated token ecosystem. Where do you find interesting applications of DLT in today’s financial system? The short answer is in the area of financial market infrastructure, which includes trading platforms, securities settlement systems, and payment systems such as the SIC system, via which transactions are settled. DLT promises efficiency gains in post-trading, i.e. in the clearing, settlement and custody of assets. A shared ledger increases transparency and simplifies the booking of transactions. In addition, it eliminates the need for costly and error-prone reconciliation processes between different databases on different systems. Moreover, DLT also allows assets such as securities, works of art or money to be securitised in the form of digital tokens, represented in a decentralised and fraud-proof network, and managed. Standardisation allows assets of different types to be represented as tokens on a shared infrastructure. Transfers of tokens can be programmed in the form of ‘smart contracts’. DLT enables the efficient and low-risk settlement of transactions. For example, the transfer of tokenised assets versus tokenised money can be effected conditionally according to preprogrammed logic. 5 It replicates the payment process with cash, where the exchange of money and goods can take place simultaneously on a delivery-versus-payment basis.

And from August 2024, the largest commercial banks active in retail payment transactions will be offering their customers the possibility of receiving instant payments. However, for instant payments actually to be available to commercial banks’ end customers, private sector solutions are still needed. According to surveys, many commercial banks are also planning to offer the possibility of sending instant payments from August 2024 onward. Competition among commercial banks should ensure that efficient payment solutions are offered to end customers, for example in ebanking. What do instant payments mean for the two-tier financial system? Instant payments settled in central bank money are an example of how our first principle – the division of labour between the central bank and the private sector in the two-tier financial system – enables successful implementation of innovations. With the introduction of instant payments, the end customers of SIC participants will also be able to settle their payments securely, quickly and in central bank money. In Switzerland, the irrevocable and secure transfer of value in central bank money in real time has to date only been possible for participants directly connected to the SIC system. This expansion of the group of participants brought about by instant payments corresponds to our second principle: the secure settlement of payments in central bank money. What about our third principle, the seamless integration of payment methods and forms of money? It is precisely here that we find the most significant innovation prompted by instant payments.