“We Do Not Want a Luxembourg Scenario for Digital Assets”

Switzerland long enjoyed a reputation as a “Crypto Nation”. Now the Federal Council is presenting new rules for stablecoins. Martin Hess, why is this so important right now?

Martin: Because international competition has intensified dramatically. Switzerland set an early milestone with the DLT Act in 2021—an internationally unique achievement at the time. But the real game changer happened recently in the United States: with the “GENIUS Act”, the US has, for the first time, enacted clear federal legislation for stablecoins. This promises legal certainty for the USD sphere and signals to other jurisdictions that the US no longer has fundamental objections to stablecoins. Switzerland must ensure it does not fall behind. Our institutions need excellent framework conditions to remain competitive in global location competition.

Natalie, as the SBVg’s lead for the association’s consultation response on the FinIA amendment: how do you assess the Federal Council’s proposal on this central point?

Natalie: This is exactly where our response to the Swiss proposal begins. We welcome the Federal Council’s intention to strengthen Switzerland’s international competitiveness in the field of stablecoins. But the current draft has one major flaw: it would effectively force Swiss banks to establish a subsidiary as a payment instrument institution if they want to issue stablecoins.

Why is this a problem for banks?

Natalie: It creates unnecessary bureaucracy without increasing safety. Banks are already comprehensively regulated and meet the highest supervisory standards. If a bank is permitted to grant loans or accept deposits today, it should also be allowed to issue value‑stable crypto‑based payment instruments—i.e., stablecoins—directly under its banking licence. In the EU, this is possible. A mandatory outsourcing requirement for Swiss banks would create a competitive disadvantage, generating complexity without adding any value.

Are there already concrete use cases for stablecoins, or is this still something for the future?

Martin: This is not the future—it’s the present. The technology works, and the use of stablecoins is growing rapidly. Real applications already exist, and they often emerge faster than we expect. Let’s look at Germany: the regulated e‑money institution AllUnity announced just a few days ago the launch of a Swiss‑franc stablecoin. This announcement is no coincidence, but a deliberate strategic positioning—knowing that Switzerland is currently working intensively on the regulatory framework. Stablecoins are increasingly being used for business applications beyond crypto exchanges.

Innovation is one side, security the other. The SBVg is also calling for “stress tests” in its consultation response. What exactly does this mean?

Natalie: The risks associated with the issuance of stablecoins must be comprehensively analysed and addressed. This concerns, in particular, ensuring the genuine value stability of stablecoins, safeguarding financial market stability, and mitigating the risk of disintermediation. If new providers—i.e., payment instrument institutions—collect large volumes of customer funds, this could lead to disintermediation: money flows from the balance sheets of traditional banks to these new actors. What does this mean for credit financing? What happens in a crisis? Are customer funds safe there? Before we open the gates widely, we are calling for a robust regulatory impact assessment with stress tests to examine the implications for financial market stability.

Martin, you have also pointed out the disintermediation risk. How do you assess it?

Martin: The disintermediation risk Natalie mentioned is real. But for CHF‑denominated stablecoins, this risk exists regardless of the country in which the stablecoin is issued. Without adapted regulation in Switzerland, decisions about this risk will be made abroad.

Another technical point in the consultation response concerns client protection and the Financial Services Act (FinSA). What is at stake?

Natalie: FinSA governs the provision of financial services related to financial instruments such as shares or funds. But the stablecoins explicitly regulated in the draft serve primarily payment purposes and are not investment products. If we classify them under FinSA, we create false expectations among clients and generate bureaucratic hurdles that miss the point and are hardly manageable in practice. What we do support is transparency: the obligation for stablecoin issuers to publish a whitepaper—an information sheet for users—is sensible and international standard.

Lastly, a look into the future. What happens if Switzerland does not get this regulation right?

Martin: Then we risk what I call the “Luxembourg scenario”. Just think of the investment fund business: activity shifted to the country offering the better framework conditions. From the 1980s onwards, this shift clearly favoured Luxembourg. The issuance of bonds has also moved away from Switzerland. Do we want to see the same thing happen with digital currencies—especially now, when the US is taking the lead with the GENIUS Act?

We must set the course so that value creation can remain in Switzerland. For this, we need smart regulation—one that fosters innovation while not placing unnecessary obstacles in the way of established banks.