UBS, five Swiss banks launch franc stablecoin sandbox

UBS and five Swiss banks have launched a regulated sandbox in Switzerland to test a Swiss franc stablecoin. The environment will trial token issuance, settlement and compliance processes for a franc-pegged digital token.

The pilot creates a closed testing network for banks, technology providers and regulators to simulate issuance, redemption and transfers using distributed ledger technology. Tests will cover intra- and interbank transfers, settlement finality, custody arrangements and anti-money-laundering and know-your-customer checks.

Participants will test technical interoperability between bank systems and token infrastructure, the operational steps for backing and redeeming tokens, and the legal and accounting treatment of tokenized commercial bank money.

The program is set up to identify practical issues such as liquidity management, reconciliation between ledgers and how token flows would interact with existing payment rails and settlement cycles.

Swiss authorities defined the sandbox’s scope and conditions. Regulators will monitor the tests to assess risks to financial stability and to determine whether regulatory adjustments are needed for broader stablecoin use.

Banks in the pilot will validate compliance controls and test client onboarding and transaction monitoring in a tokenized environment.

Organizers expect participating firms to collect operational data and refine technical designs before any decision about issuing a commercial franc stablecoin more widely.

The pilot will examine reserve backing and redemption mechanisms designed to maintain a one-to-one peg with the Swiss franc and will test liquidity provision under market stress scenarios.

The tests will collect data on transaction throughput, settlement times, reconciliation processes, reserve management and compliance effectiveness. That information will inform proposals for governance, custody standards and risk management protocols should banks pursue stablecoin products beyond the pilot.

The sandbox builds on earlier Swiss work, including Project Helvetia in 2020, when the Swiss National Bank and market infrastructure provider SIX tested wholesale tokenized cash and securities settlement on distributed ledgers. The new pilot focuses on stablecoins that could be used for retail and wholesale transactions and on the steps banks would take to offer tokenized franc services alongside traditional accounts.

Background legal and technical work in Switzerland has examined how to integrate distributed ledger technology with existing financial market infrastructure and how to create a regulatory framework for tokenized assets. The sandbox provides a coordinated testing ground involving multiple commercial banks to evaluate interoperability and competitive effects.