“With the CHF stablecoin, now is the time to decide who helps shape the future”

In February, we discussed the new stablecoin regulation here. At the time, the warning was clear: Switzerland must not become a bystander. What has happened since then, Martin Hess?

Martin: A great deal. Developments have accelerated further internationally. And in Switzerland, too, we have moved beyond theory: in spring, several banks and other stakeholders jointly launched a CHF stablecoin sandbox to test concrete applications under real-world conditions. So things are already moving. With our new in-depth study, we are taking the analysis a step further: we examine the concrete benefits that different designs of a CHF stablecoin can generate for banks and the economy, and which design features can help mitigate risks.

Natalie Graf, from a regulatory perspective, does this mean that Switzerland should simply enable stablecoins as quickly as possible?

Natalie: No. Speed alone is not enough. What matters is how the regulatory framework is designed. A CHF stablecoin must be secure, trustworthy and economically viable. At the same time, Swiss banks must not be structurally disadvantaged compared with providers in Switzerland and abroad. In particular, banks should be able to issue stablecoins directly under their banking licence without having to set up a subsidiary as a payment instrument institution. The aim is to adequately address the risks associated with stablecoins and ensure that our banks can participate in this potential future market under competitive conditions.

What is the most important finding from the new analysis?

Martin: A CHF stablecoin from Switzerland can offer clear advantages. Particularly interesting use cases include B2B applications, cross-border payments, treasury transactions and tokenised financial markets. But our analysis also shows that the benefits do not arise simply because a stablecoin exists. They only materialise when stablecoins are actually integrated into economic processes. This integration will be key to the development of a Swiss CHF stablecoin.

Why is it so important for a CHF stablecoin to be issued in Switzerland?

Martin: Because the alternative is not “stablecoin or no stablecoin”. If these means of payment become widely adopted, foreign providers can also offer CHF stablecoins. The first CHF stablecoins issued abroad are already appearing. With a Swiss solution, however, supervision, know-how, value creation and important payment cycles remain within the Swiss financial system. This strengthens financial stability and the competitiveness of our banks, while reducing dependence on foreign solutions.

What is Swiss Banking’s role in this process, particularly with regard to the needs of its member banks?

Martin: As an industry association, our role is to assess at an early stage what developments like these mean for banks. Our members have very different business models, and each bank decides for itself whether it wants to participate in this market. We know that, given Switzerland’s low interest rate environment, income from stablecoin issuance is limited. However, we also identify income opportunities throughout the stablecoin value chain. Given the market potential, we want to prevent Swiss institutions from being sidelined by regulation while the market develops elsewhere.

From the banks’ perspective, where is the greatest need for regulatory action?

Natalie: Two points are particularly important. First, requirements regarding the composition of reserves must safeguard financial stability while at the same time allowing for practicable, scalable and economically viable business models. Second, combating money laundering requires a risk-based approach that is coordinated internationally with the relevant jurisdictions. Financial stability and market integrity are non-negotiable. But regulation must not result in a situation where a CHF stablecoin could theoretically be issued from Switzerland but, in practice, can only be offered economically from abroad.

Don’t stablecoins also pose challenges for banks if they lead to deposit outflows?

Martin: This risk exists, particularly with certain stablecoin designs. Very strong growth in stablecoins could lead to deposit outflows on a scale that affects banks’ balance sheets and, as a result, their capacity for lending. However, our analysis shows that these effects depend heavily on the volume and specific design of the stablecoin. The effects on banks’ balance sheets do not, in principle, depend on whether the CHF stablecoin is issued in Switzerland or abroad. With a domestic stablecoin, however, the risks are easier to mitigate because Swiss banks can influence its design. This is precisely why we need a framework that enables a Swiss solution. This allows risks to be adequately mitigated while enabling banks to tap into the income potential.

Natalie, what would a good Swiss solution look like to you?

Natalie: A solution in which a CHF stablecoin is secure and trustworthy, Swiss banks benefit from a level playing field and innovation can take place here in Switzerland. This requires a practicable, internationally compatible regulatory framework that is conducive to stability. Switzerland has a strong financial centre and high regulatory standards. Our goal must be to combine stability and competitiveness while at the same time leaving room for innovation.

Martin, if we look back in two or three years, what would need to have happened for you to say that Switzerland had made the right decisions?

Martin: Our banks should have a choice: those that want to offer a CHF stablecoin should be able to do so under practicable and internationally competitive conditions. What matters is that concrete applications emerge and that value creation and know-how remain in Switzerland. One thing is clear: payment infrastructure is undergoing a profound transformation. Switzerland, which has ranked first in global innovation rankings for years, cannot afford to stand on the sidelines.

Thank you both for your time and for speaking with us.