The Franc Stays at Par

Washington sold the GENIUS Act as a payments revolution. Read the reserve clause instead. Every compliant token must be backed 1:1 by cash or Treasury bills maturing within 93 days, and the issuer may not pay holders a cent of interest. A T-bill vending machine with a crypto front end. At the end of September, Petra Tschudin, one of the three rate-setters at the Swiss National Bank (SNB), told professional forecasters in Zurich what that means for everyone else. Big stablecoins sitting outside the two-tier system, where banks hold central bank money and everyone else holds bank deposits, make a central bank's mandate harder to fulfil. Her request: rules that keep rate-setters in charge.

The market is past $300B, almost all of it in dollars. Tether alone held about $140B of US Treasuries at its last detailed count, roughly the 17th largest holding of American government debt in the world. Holders earn zero. Tether keeps the coupon, about $1.5B of operating profit in the second quarter. Seigniorage, privatised.

Why should a franc economy care about a dollar token? Because the leak runs through Swiss banks. Every franc a company moves into a stablecoin leaves the deposit base that funds Swiss loans. Fewer deposits, less lending, and a policy rate, now 0%, that reaches fewer borrowers. Worse, a franc token issued outside the system is not guaranteed to be worth a franc.

Between 1837 and 1863, America ran that experiment. State banks printed their own notes, and a dollar from a distant bank traded at a discount. Merchants bought bank note reporters to look up what their cash was worth. It took a civil war, a national currency and a 10% tax on state notes to end it. Congress seems to have mislaid the file.

Since 2023 the SNB has settled real trades in wholesale digital francs, central bank money on a blockchain open only to banks, and will keep going until at least 2028. A retail version for households? Rejected. The risks outweigh the benefits. UBS, the postal bank PostFinance and Raiffeisen are testing a franc stablecoin together inside a bank sandbox, and the federal government's draft law lets only licensed payment institutions issue franc tokens, with client money ring-fenced. Volumes on the SNB platform are thin, and Tschudin said so herself. Fine.

Frankfurt is still preparing a retail digital euro for 350M people. Washington privatised the money. Frankfurt wants to nationalise the wallet. The SNB does not need to win a race to tokenise. It needs a franc worth a franc in every account, steered by one rate. Boring. Investors pay a premium for Swiss money precisely because nobody in Bern is trying to sell it as a product. Washington now sells the dollar from a vending machine. Advantage, franc.