Frankencoin

The Frankencoin is a digital currency designed to track the Swiss franc. The Frankencoin token, ZCHF, is an ERC-20 token on Ethereum; the current contract was deployed on 28 October 2023, as Etherscan shows. The documentation lists further ZCHF instances on Optimism, Gnosis, Polygon, Sonic, Base, Arbitrum and Avalanche.

Luzius Meisser designed the system in his doctoral thesis at the University of Zurich, Essays in Decentralized Finance, approved in February 2024. In the thesis he writes that he helped start Swiss Crypto Tokens AG, the company that launched the CryptoFranc (XCHF), a Swiss franc coin with an issuer. Luzius Meisser and Marc Baumann announced a public beta in April 2023. The Frankencoin Association, a non-profit in Zug with Johannes Kern as managing director, is the point of contact for the ecosystem but, in its own words, "does not control the protocol itself."

New ZCHF comes from positions. A borrower locks collateral, such as ETH or wrapped bitcoin (WBTC), in a position and mints ZCHF against it up to a stored liquidation price. The documentation describes two ways in: propose a new position, which holders of the Frankencoin Share Token can veto during a waiting period, or clone an accepted position with its terms. A mint deducts an up-front fee and keeps part of the amount as a minter reserve, so the wallet receives less than the gross amount. The collateral stays locked until the owner pays the ZCHF back.

No price oracle tells the system what the collateral is worth. Anyone who thinks it trades below the liquidation price can challenge the position by posting the same collateral token. A two-phase auction follows. In the first phase, bidders can buy the challenger's collateral at the liquidation price; if they take all of it, the position stays untouched. If collateral is left over, the price falls, bidders buy the position's collateral, and in the current contract version the challenger receives 2 percent of the winning bid. Auctions can take days, so the protocol reacts more slowly than an oracle-triggered liquidation, a trade-off its risk page names. The contracts are open source on GitHub.

Fees and liquidation results flow into a reserve of ZCHF, split into minter reserves and equity. When a liquidation leaves a loss, the protocol draws first on the affected position's minter reserve, then on the equity, then on the reserves of other minters. The documentation adds that this order does not guarantee that every loss fits into the reserve.

The equity belongs to the holders of Frankencoin Pool Shares (FPS). The newer Frankencoin Share Token (FCS) wraps each FPS one to one and is the governance token. Governance works by veto: a proposal, such as a new collateral type or minting module, passes unless holders with more than 1 percent of the time-weighted votes block it. Anyone can apply for a new minter for a fee of 1,200 ZCHF and a waiting period of at least 60 days, under the Frankencoin governance rules. FCS holders also set the rate of the savings module, which pays interest on deposited ZCHF out of the equity.

The largest stablecoins rest on an issuer. The thesis by Luzius Meisser describes USDT and USDC as "based on the promise of an issuer to always sell and repurchase them at the price of the reference currency." The Frankencoin has no issuer and no redemption promise. The closest relatives of Frankencoin are DAI and USDS from Sky, the protocol that grew out of MakerDAO: they are also minted against more collateral than they are worth, but they take their prices from oracles.

Tokenized deposits and central bank money are claims on a bank or a central bank, which puts them further still from the Frankencoin. Tokenized deposits are bank deposits on a blockchain, and the Swiss National Bank sees no clear advantages for the public in a retail digital franc.

FINMA sets out its position in Guidance 06/2024, starting from the holder's claim against an issuer: FINMA usually treats that claim as a bank deposit or a collective investment scheme, and the issuer has to identify stablecoin holders under the Anti-Money Laundering Act. The Frankencoin gives no such claim. On its compliance page the association classifies ZCHF as a payment token and a currency-linked stablecoin under the FINMA guidelines, adding that "there is no issuer other than the smart contract code executing the mint function." In an interview with finews (in German), Luzius Meisser blames that guidance for the fact that Switzerland no longer has stablecoin issuers of its own. The Federal Council has proposed a new license for payment instrument institutions, which would be allowed to issue stablecoins.

In the EU, a stablecoin that tracks one official currency is an e-money token under MiCA, and only a bank or an e-money institution may issue one. Recital 22 of the regulation leaves out services provided "in a fully decentralised manner without any intermediary". The association argues that ZCHF has no identifiable issuer, so the issuer duties of MiCA Titles II, III and IV do not apply. Even so, a MiCA white paper for ZCHF is in the interim register of ESMA for crypto-assets other than e-money and asset-referenced tokens, filed by MiCA Crypto Alliance Opco Limited with the Malta Financial Services Authority as competent authority, so that EU exchanges can list the coin. finews reported the filing shortly before the MiCA transition period ended.

AllUnity launched CHFAU on 26 February 2026, as an e-money token under its BaFin license. AllUnity is a regulated e-money institution established by DWS, Flow Traders and Galaxy, and also issues the euro stablecoin EURAU.

In Switzerland, UBS, PostFinance, Sygnum, Raiffeisen, Zürcher Kantonalbank, BCV, SIX, TWINT and Swiss Stablecoin AG test the franc stablecoin CHFD in a sandbox, where it has been live since the end of June. In August 2024 Bitcoin Suisse stopped the CryptoFranc, and its notice says that issuance and redemption ended as well. For banks, the Swiss National Bank has provided wholesale central bank money on the SIX Digital Exchange since the end of 2023 in Project Helvetia, a pilot extended until at least mid-2027.

The Frankencoin sits on one side of the question that opens Capital & Code in Frankfurt: who will power Europe's digital economy, public money or private money. AllUnity, the issuer of CHFAU, hosts the conference, and Finance Loop is a media partner of Capital & Code 2026. Finance Loop is also a partner of the Digital Euro Association, whose Digital Euro Conference covers stablecoins next to central bank digital currencies.

BTC-ECHO, the media partner of Finance Loop for crypto assets and DeFi in the German-speaking countries, published Dominic Döllel's article Frankencoin: Stablecoin auf Basis der härtesten Währung Europas (in German). For the Swiss side of the topic, see Crypto Valley and fintech in Zurich.

ZCHF is one of several Swiss franc stablecoins and is minted against crypto collateral. CHFAU from AllUnity is an e-money token with franc reserves and a redemption right. VNX issues VCHF, which it describes as backed 1:1 by fiat reserves with at-par redemption. CHFD from Swiss Stablecoin AG runs in a sandbox of Swiss banks. The CryptoFranc (XCHF) of Bitcoin Suisse was discontinued.

No company. ZCHF comes out of smart contracts whenever someone mints against collateral, and holders have no claim against anyone to swap it for francs. The Frankencoin Association in Zug supports the ecosystem and runs one of several independent frontends, but it does not control the protocol.

The documentation states that ZCHF "has no fixed redemption promise for Swiss francs" and that its market price can diverge from one franc; collateral, reserves, borrowing costs and market activity support the rate.

FPS are the equity shares of the Frankencoin reserve. Their holders gain when fees come in and lose when liquidations leave a shortfall, and the contract prices them at a reference valuation of three times the equity capital. FCS wraps FPS one to one and carries the votes, though ZCHF users need neither token. The association classifies FPS as a utility token under the FINMA guidelines.

Both are minted against over-collateralized positions without a company that promises redemption. DAI and USDS track the US dollar, ZCHF the Swiss franc. Sky reads collateral prices from Chronicle oracles with a one-hour delay and lets anyone swap USDS 1:1 for USDC; the Frankencoin uses auctions and has no such swap into an issuer coin.

Uses of Frankencoin include payments at Spar stores in Switzerland, Gnosis Pay debit cards and IBAN accounts at Mt Pelerin. ZCHF can be bought by bank transfer at Mt Pelerin and DFX and traded on decentralized exchanges such as Uniswap and Curve. Frankencoin also names Aktionariat in Zurich among its ecosystem companies, which runs markets for tokenized company shares.

The savings module pays interest on deposited ZCHF at a rate FCS holders set. The interest rate is a simple annual rate paid out of the reserve's equity, and a fresh deposit starts earning after a three-day delay. FCS holders earn or lose with the equity itself, a different risk from holding ZCHF.