Swiss Regulatory Reform Redefines the Institutional Perimeter of Digital Finance

More than CHF 4 BN in crypto-related client assets are currently held by institutions under FINMA supervision, a scale that has outgrown the legal framework created for fintechs six years ago. The Federal Council has therefore proposed a revision of the Financial Institutions Act that would abolish the existing fintech licence and introduce two new authorisation regimes, formally integrating stablecoin issuance and crypto-asset services into Swiss financial market law.

From niche activity to policy-relevant market segment

Digital assets have moved from the margins of the Swiss financial system into areas with direct regulatory relevance. According to the State Secretariat for International Finance, Switzerland hosts more than 1 ‘200 blockchain-related companies, while FINMA now supervises over 70 institutions for which crypto custody, trading or tokenisation represent a material share of activity. These firms interact with banks, payment systems and institutional investors, increasing the potential for spillovers beyond the crypto sector itself.

The existing legal framework has struggled to keep pace with this development. Introduced in 2019, the fintech licence was designed for small-scale innovation with limited balance-sheet risk. Stablecoin issuers and crypto service providers have since expanded in volume and complexity, often relying on supervisory interpretation rather than explicit statutory rules. The Federal Council’s consultation seeks to address this mismatch by aligning regulation more closely with economic function.

Redrawing the regulatory map

The centrepiece of the reform is the creation of two new categories of authorised institutions. Payment instrument institutions would cover the issuance of stablecoins and similar digital means of payment, while crypto institutions would encompass custody, brokerage, trading venues and related infrastructure services. The separation reflects a judgement that payment-related risks differ from those arising in trading and safekeeping activities.

For stablecoins, legal certainty is the primary concern. Consultation documents point to unresolved questions around insolvency treatment, redemption rights and the safeguarding of reserve assets. By anchoring segregation requirements and governance standards directly in law, policymakers aim to reduce the risk that a failure at issuer level undermines confidence in payment arrangements or triggers wider reputational effects for the Swiss financial centre.

Capital requirements and balance-sheet discipline

Replacing the fintech licence also changes the economics of stablecoin issuance. Under current rules, own funds are capped at CHF 3 M, regardless of transaction volume or outstanding liabilities. The Federal Council considers this ceiling inadequate for issuers handling large payment flows. The proposed regime would link minimum capital to the value of issued instruments, broadly reflecting discussions at the Financial Stability Board and the Committee on Payments and Market Infrastructures.

At system level, the impact is modest in a banking sector with aggregate assets of around CHF 3’400 BN . At a firm level, the implications are significant. Higher capital intensity raises funding costs and reduces leverage, favouring well-capitalised players and institutions with access to long-term capital. Smaller issuers face pressure to adapt their business models or seek partnerships, reinforcing consolidation trends already visible in the sector.

Supervisory expectations before legislative change

FINMA has already tightened its approach using existing law. In guidance issued in 2024, the authority clarified that most fiat-referenced stablecoins constitute claims on the issuer and may fall under banking or collective investment regulation depending on how reserves are managed. FINMA also reiterated that anti-money laundering obligations apply comprehensively, including know-your-customer requirements where token holders can be identified.

Industry bodies have criticised this stance as burdensome, arguing that universal KYC requirements undermine the efficiency of payment tokens and weaken Switzerland’s competitive position. FINMA has responded that the country’s exposure to cross-border financial flows makes reputational and legal risks particularly acute, justifying a cautious interpretation until Parliament provides clearer statutory boundaries.

Capital markets and investor behaviour

Investment data suggest that regulatory clarity has a measurable effect on capital allocation. Venture capital investment into Swiss crypto and blockchain firms declined sharply between 2022 and 2024, in line with global market correction but amplified by legal uncertainty. According to SECO figures, activity stabilised in 2025 as the contours of a new framework became visible, although volumes remain well below the 2021 peak.

Institutional investors continue to approach the sector selectively. Pension funds face regulatory limits on alternative assets, and stablecoins do not yet fit neatly into existing categories. Even so, disclosures by Swiss asset managers indicate growing interest in regulated stablecoin infrastructure as a means of reducing settlement risk and operational costs in tokenised securities markets. The attraction lies in efficiency and risk management rather than speculative return.

Evidence from Swiss regulated institutions

Public disclosures from FINMA-supervised digital asset banks illustrate how regulation is reshaping business models. For some institutions, revenue from custody, tokenisation and infrastructure services now exceeds trading income, reflecting a shift towards utility-based activities. Compliance, legal and risk management functions often account for more than 25% of staff, a higher proportion than in traditional private banking.

These figures underline the cost of operating within the Swiss regulatory perimeter. Scale, governance capacity and access to capital become decisive competitive factors, while smaller firms increasingly focus on technology provision rather than direct financial intermediation. The result is a gradual stratification of the market between infrastructure providers and regulated intermediaries.

International alignment and competitive constraints

The Swiss reform unfolds against a fragmented international backdrop. The European Union’s Markets in Crypto-Assets Regulation establishes a harmonised regime but imposes issuance caps and detailed governance requirements. The United States continues to rely on a mix of state and federal oversight. For Switzerland, divergence carries economic risks, including restricted market access and higher compliance costs for cross-border operations.

Federal Council documents explicitly reference Financial Stability Board standards, signalling an intention to ensure interoperability and supervisory cooperation. Given the importance of cross-border payments and wealth management to the Swiss economy, alignment with global expectations is framed less as policy choice than as a condition for maintaining the financial centre’s international role.

Innovation, resilience and policy trade-offs

At its core, the reform reflects a familiar Swiss trade-off between openness to innovation and systemic resilience. Stablecoins and tokenised assets promise faster settlement and programmable features, but they also concentrate operational and governance risk in private issuers. Switzerland has chosen not to pursue a retail central bank digital currency, increasing reliance on private solutions within a tightly supervised environment.

Critics warn that higher regulatory thresholds may deter experimentation and shift activity abroad. Supporters counter that Switzerland’s comparative advantage lies in legal certainty and trusted infrastructure rather than rapid consumer-scale expansion. Past experience in asset management and private banking suggests that policymakers prioritise depth and stability over speed.

Institutional consequences over the legislative cycle

If adopted, the revised Financial Institutions Act could enter into force in 2027, with transitional arrangements for existing licence holders. The number of authorised crypto-related institutions is likely to fall, while their average size and systemic relevance increase. Clearer rules may accelerate tokenisation initiatives that rely on stablecoins for settlement, particularly in segments where Swiss law already supports digital registers.

The longer-term effect will depend on supervisory execution and market adaptation. By embedding digital assets within established legal structures, Switzerland is redefining the institutional boundaries of its financial centre rather than endorsing a specific technology. The success of the reform will be judged by its ability to preserve financial stability, regulatory credibility and efficient capital allocation as digital instruments become more tightly interwoven with core financial activity.