UBS and five banks pilot Swiss franc stablecoin

UBS and five Swiss commercial banks launched a sandbox trial this month in Switzerland to test a stablecoin pegged to the Swiss franc for payments and settlement on distributed ledgers. The trial runs in a controlled, regulator-reviewed environment limited to participating institutions and capped transaction volumes.

Participating banks will issue tokens that are backed by bank deposits and use them in pilot transactions to examine technical, operational and regulatory aspects of on-chain money transfers between financial institutions. Retail customers are not included in the pilot; testing will concentrate on bank-to-bank and institutional flows.

The pilot focuses on core banking processes adapted for distributed ledger technology, including token issuance, custody, transfer, reconciliation and settlement finality. Banks will test interoperability with existing payment and settlement systems, the security of wallet and custody solutions, and procedures for converting tokenized francs into traditional account balances held at banks.

Legal and compliance areas under review include anti-money-laundering controls, customer identification processes, transaction monitoring and the contractual arrangements needed for tokenized liabilities. The trial will also assess operational resilience, transaction latency, liquidity management and the ability to reconcile on-chain records with internal accounting systems.

Swiss supervisory authorities are involved in the sandbox framework, which allows regulated firms to test distributed ledger applications under oversight. The pilot builds on prior Swiss experiments with tokenized assets and ledger-based settlement that involved both banks and fintech firms.

At the conclusion of the trial, participating banks will report on technical performance, compliance findings and any gaps identified in legal or operational frameworks. Supervisors and the banks will use those reports to inform potential governance requirements, risk controls and the scope of future use cases for a franc-pegged stablecoin within the Swiss financial system.