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Switzerland, which has led the way in the digital finance space, is adding distributed ledger technology (DLT) trading facilities to its payment system.
The Swiss National Bank (SNB) has said that it will now admit DLT trading facilities that have licences issued via the country’s Financial Market Supervisory Authority to the Swiss Interbank Clearing System (SIC) system.
Platforms that use the technology will be able to participate on the SIC system in Switzerland if they operate a securities settlement system and settle payments in Swiss francs, the SNB has confirmed.
DLT is a type of tech infrastructure and protocol platform that allows simultaneous access, validation and record updating. Unlike most traditional payment systems, DLT, as the name suggests, is decentralised.
The SNB has introduced this after the passing of the Federal Act on the Adaptation of Federal Law to Developments in Distributed Ledger Technology.
This came into force in August last year and saw the creation of the licensing category "DLT trading facilities" in the Financial Market Infrastructure Act.
Combining technologies
The combination of these technologies with more traditional payments systems has become increasingly popular in recent years. For example, VISA launched B2B connect in June 2019 to enable cross-border payments, including support for DLT-based non-card payment network.
Meanwhile, MasterCard partnered with R3, a fintech whose Corda ecosystem includes central banks as well as financial services and tech firms.
The technology has also caught the eye of regulators. As part of its 2020 digital finance package, the European Commission proposed a DLT regulatory sandbox.
Named the Pilot Regime For Market Infrastructures Based On DLT, it will enable regulated institutions to develop DLT-based infrastructure for the trading, custody and settlement of securities. The proposed regime allows for operators to request exemptions from certain regulatory requirements that have previously been identified as obstacles to such development.
Singapore’s financial supervisor has also invested in the use of DLT, having launched Project Ubin.
This was a collaborative project with the industry to explore the use of DLT for the clearing and settlement of payments and securities. This concluded in July 2020.
