Swiss Banking Association Releases Report Assessing Stablecoin Potential, Warns of Currency Market Share Risk if Not Acted Promptly.
In the context of digital currencies gradually becoming an indispensable part of the global financial system, the Swiss banking sector is expressing growing concern about stablecoins – a type of cryptocurrency designed to maintain stable value. Last month, the Swiss Banking Association (SBA) published a comprehensive report studying the domestic potential of stablecoins, driven by a regulatory review process initiated by the financial regulator FINMA last year.
The report's core message is quite clear: stablecoins represent a notable opportunity, and if Switzerland does not establish a solid position in time, the country risks ceding currency market share to international competitors. While not providing specific action recommendations, the SBA report detailed the potential and risks associated with stablecoins in the Swiss financial context.
Legal Challenges Hindering Development
Currently, stablecoin activities in Switzerland are divided into three main groups: tokens backed by central bank money for institutional investors (such as products from Sygnum and SIX Digital Exchange), stablecoins for general users (currently only a few small-scale projects), and banks like BBVA Switzerland providing access to major US dollar-pegged stablecoins.
One of the primary barriers to stablecoin development in Switzerland is its strict legal framework. According to the report, Switzerland requires issuing organizations to identify stablecoin holders at all times, not just during issuance or redemption. This is a much stricter level of control compared to most other countries, described by a Swiss lawyer as "pure Swiss gold-plating", making stablecoin issuance "nearly economically and commercially impossible".
Switzerland currently lacks a dedicated legal framework for stablecoins and is using a patchwork of laws to regulate related forms. Depending on structure, stablecoins may be classified as deposits or collective investment funds. If the issuing organization is not a bank, they must have bank guarantees, making stablecoins appear similar to deposits – an approach causing significant concerns for FINMA regarding bank risks.
To address this situation, SBA is exploring options for deploying stablecoins compatible with Swiss conditions. The report discusses suitable reserve assets following the "no questions asked" principle – with central bank money considered the ideal asset. However, the proposed compromise solution is for stablecoin reserves to include a mix: central bank money, government bonds, and bank deposits.
The report also points out that while the Swiss Central Bank has rejected the possibility of issuing CBDC for consumers, issuing stablecoins with reserves entirely in central bank money could draw a large volume of deposits away from commercial banking systems, leading to an undesired "narrow banking" model.
In terms of practical applications, SBA analyzed potential use cases for stablecoins such as digital asset payments, DeFi, and cross-border commercial payments for businesses. Particularly, the report emphasizes the importance of maintaining the Swiss Franc's position in the global monetary system – if viewing the currency market as a pie, Switzerland wants to ensure its "slice" is not reduced and potentially expanded.
However, alongside opportunities, the report also acknowledges numerous serious risks that need strict management, especially regarding financial stability. If viewing the money market as a "static whole", stablecoin development could cause cash and bank deposits to decline. While the report identifies challenges from deposit replacement, alternative revenue sources for banks – such as custody fees, government bond intermediation, on/off-ramp services, and foreign exchange – were not deeply analyzed.
Overall, the SBA report reflects Switzerland's traditional style: cautious yet proactive, supporting responsible innovation while preserving its reputation for financial stability and prudence. In an increasingly fierce global competition, Switzerland seems determined not to let the "stablecoin ship" sail without being on board.
