Transformation of the Financial Market Infrastructure in Switzerland: The Role of Stablecoins and Deposit Tokens
The debate on digital forms of money, especially stablecoins and deposit tokens, has evolved in recent years from theoretical concepts to practical challenges. Stablecoins, which aim to maintain a stable value relative to a reference, play a central role in connecting traditional financial systems with DLT-based infrastructures. At the same time, interest is growing in tokenised bank deposits, so-called deposit tokens, which serve as a means of digitising interbank transactions. Thanks to its technological know-how and advanced regulation, the Swiss financial centre offers an environment that favours moving experimental initiatives beyond the stage of concept studies. This article first explains the basic definitions and differences between stablecoins and deposit tokens before highlighting current developments in Switzerland. It concludes by discussing the strategic, procedural, technological and cross-cutting implications for banks.
Stablecoins and Deposit Tokens – A Brief Overview
Stablecoins and deposit tokens represent two different approaches to the digitisation of money. Stablecoins are crypto-assets intended to maintain a stable value in relation to a specific asset or a basket of assets, most commonly currencies (European Parliament, 2021; Bank for International Settlements, 2022). In 2024, FINMA clarified the regulatory requirements for stablecoin issuers. Going forward, issuers of stablecoins will need a banking licence and must comply with strict KYC and AML procedures (Kuster, 2025). This ties domestic stablecoin projects more closely to the traditional banking supervisory regime. To avoid “runs,” the FSB also calls for effective stabilisation mechanisms, clear redemption rights (i.e., conversion into traditional currency), and appropriate supervisory requirements (Financial Stability Board, 2023). A well-known example of the vulnerability of so-called algorithmic stablecoins (i.e., stabilised by algorithms rather than reserves) is TerraUSD (UST). This stablecoin was designed to be pegged one-to-one to the US dollar, but it lost its peg within a few days in May 2022 (Bank for International Settlements, 2022; Financial Stability Board, 2023; Liu et al., 2023). Many investors simultaneously withdrew their funds from the Anchor protocol on the Terra blockchain, raising doubts about the system’s ability to maintain the stablecoin’s value over time. The massive outflows from Anchor undermined confidence in the underlying mechanism (Liu et al., 2023). TerraUSD’s stabilisation mechanism, based on exchanges with the LUNA token, failed because no real collateral was posted (Liu et al., 2023). As more users sold UST and swapped into LUNA, LUNA’s supply surged while its price collapsed. This triggered a so-called “death spiral,” in which both tokens rapidly lost value (Adrian, 2022).
While stablecoins primarily function as market-based crypto-assets, deposit tokens digitise existing sight deposits (“giro money”) within the supervised financial system and thus contribute to transforming the underlying payment and settlement infrastructure. They combine the safety of regulated bank deposits with the efficiency and programmability of distributed ledger technologies. A deposit token is a means of payment based on distributed ledger technology (DLT) that resembles and builds on the traditional deposit system (Swiss Bankers Association, 2024). It enables users to process transactions via an innovative infrastructure based on DLT and smart contracts (Swiss Bankers Association, 2024). A current example is the deposit-token pilot project coordinated by the Swiss Bankers Association, in which UBS, PostFinance and Sygnum executed the first legally binding interbank payment on a public blockchain (Swiss Bankers Association, 2025a; Sygnum Bank, 2025). A similar approach is being pursued in Germany, where an initiative led by Deutsche Bank, DZ Bank, Commerzbank and the Bundesbank is working on a giro money token (“CBMT”). Analogous to Swiss deposit tokens, this would represent tokenised sight deposits and serve as a digital interbank settlement asset (cf. German Banking Industry Committee, 2023). Both models aim to embed book-money-based liquidity into DLT market infrastructures and to automate traditional payment processes. The classification of deposit tokens and stablecoins within the traditional monetary system is illustrated in Figure 1.
Stablecoins and Deposit Tokens in Switzerland: Milestones of a Programmable Money and Settlement Architecture
In its expert report, the Swiss Bankers Association emphasises that stablecoins have the potential to accelerate the digitalisation of payments, particularly through shorter settlement times and lower transaction costs (Swiss Bankers Association, 2025c). Similar advantages also apply to deposit tokens, which can even improve the efficiencies of the current monetary system, for example through smart-contract-based transaction settlement (Bank for International Settlements, 2023). Today, Switzerland is among the most active jurisdictions in the field of digital forms of money. Both stablecoin issuances and pilot projects for deposit tokens are being tested here under clearly defined legal frameworks. While stablecoins are primarily being tested as settlement and treasury instruments (cf. Jhanji et al., 2025; Schaaf, 2025), deposit tokens are being developed for diverse applications in the interbank market and in corporate payments (German Banking Industry Committee, 2024; Swiss Bankers Association, 2023). Various manifestations of tokenised forms of money are currently emerging in Switzerland, based on the concepts of stablecoins and deposit tokens explained above. These initiatives differ in particular with respect to the issuer profile, the type of backing, and their scope of use within the financial system.
Stablecoins in the Swiss Market
A prominent example is ZCHF (“Frankencoin”) by the Mt Pelerin Group, a decentralised stablecoin designed to be pegged 1:1 to the Swiss franc and used for digital payments on blockchain (Gerardi, 2025).
By contrast, Bitcoin Suisse terminated the CryptoFranc (XCHF) project in 2024 due to insufficient market acceptance (Bitcoin Suisse, 2024).
These developments illustrate that fully or over-collateralised stablecoin models have so far proven the most viable, although broader market penetration is still pending. Projects such as those by Centi AG or the Frankencoin initiative reflect the growing diversity of stablecoin concepts in the Swiss market (Centi Ltd., 2024; Frankencoin, 2025). Lugano’s LVGA token represents a local stablecoin pegged to the Swiss franc, backed by municipal assets, and used as a digital means of payment within the “Plan B” smart-city initiative (Città di Lugano, 2025).
Deposit Tokens in the Swiss Market
Within the banking sector, deposit tokens are gaining strategic importance as a regulated and programmable form of book money. Sygnum Bank and SIX Digital Exchange (SDX) have created two tokens, the Digital CHF (DCHF) and the tokenised CHF (tCHF), that are fully backed by sight deposits at the Swiss National Bank and thus provide a particularly stable and trustworthy value base (Sygnum Bank, 2020; Swiss Bankers Association, 2025c). According to the Swiss Bankers Association, deposit tokens are being developed for a wide range of use cases in the interbank market and in corporate payments (German Banking Industry Committee, 2024; Swiss Bankers Association, 2023). In September 2025, UBS, PostFinance and Sygnum Bank, together with the Swiss Bankers Association, carried out the first legally binding interbank transaction using deposit tokens on a public blockchain. The results report describes a permissioned structure with clearly defined roles, governance rules, mint and burn mechanisms, and a technical linkage to the Swiss Interbank Clearing (SIC) system (Swiss Bankers Association, 2025a; 2025b; Sygnum Bank, 2025). This demonstrated convincingly that deposit tokens can be deployed in a legally binding, interoperable and operationally robust manner.
Developments in Switzerland show that stablecoins and deposit tokens are emerging as central forms of tokenised money with different functions. Stablecoins are used primarily for digital store-of-value and payment purposes, particularly in applications based on blockchain technology. Deposit tokens, by contrast, are developed within the regulated banking sector and serve the secure, programmable settlement of transactions in institutional and corporate contexts. Both approaches can contribute to efficiency gains, transparency and automation in payments and foster the continued development of Switzerland’s digital financial centre.
Implications for Banks from Stablecoins and Deposit Tokens
Strategic implications: The current developments around regulated stablecoins and deposit tokens mark the transition from conceptual experimentation to productive market maturity. Banks must build capabilities to provide tokenised payment processes safely, compliantly and in an integrated fashion (cf. McKinsey & Company, 2025). Institutions that build expertise early can consolidate their role as trusted intermediaries in the emerging digital financial system (cf. Basel Committee on Banking Supervision, 2024). A key strategic question is whether they will issue stablecoins themselves, act as custody or settlement agents, or provide the technical infrastructure. Innovation and technology competence thus become decisive success factors for future competitiveness.
Process implications: The introduction of stablecoins and deposit tokens also fundamentally changes the operational logic of payment and liquidity management (cf. BIS & CPMI, 2024). Transactions are no longer processed in batches but in real time on the basis of digital tokens. As a result, the time buffers between payment initiation, posting and value date disappear. For treasury, this means intraday liquidity must be continuously monitored and managed to avoid liquidity and refinancing risks (cf. PYMNTS, 2025).
Technological implications: Implementing stablecoins and deposit tokens requires a technological expansion of existing payment and settlement systems (Financial Stability Board, 2024). Banks must develop architectures that ensure interoperability between traditional core systems and decentralised, DLT-based infrastructures (cf. Bank for International Settlements, 2025). This technological shift demands targeted capability building to integrate innovation safely, efficiently and in regulatory compliance into business models.
Cross-cutting implications: Moreover, a corporate culture is needed that combines technological openness with regulatory integrity. Building knowledge about digital forms of money and their effects becomes an ongoing learning task at all levels of the organisation. In an increasingly tokenised financial system, adaptability is essential to align innovation and regulatory coherence over the long term.
Conclusion
The introduction of regulated stablecoins and deposit tokens marks a structural transformation in the evolution of the financial system. Rather than replacing existing monetary and settlement structures, these instruments expand and strengthen them through greater programmability, interoperability and technological efficiency. Switzerland is positioning itself as a leading location for integrating programmable forms of money into existing financial market infrastructures. For banks, this creates a comprehensive transformation task that requires coordinated expansion of strategic, technological and regulatory capabilities. The central challenge will be to align this transformation process with the continuous development of the regulatory framework in order to safeguard innovation, stability and trust in an increasingly digital financial architecture.
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